How to avoid foreclosure?

Foreclosure is the worst nightmare for a home owner. IF you are stuck in a foreclosure mess, you can avoid it or you can prevent the worst happening. There are some steps which can help you during a foreclosure.

• Most important step to take is to contact your lender. Make your lender aware of your situation. Don't neglect the problem. The more you avoid, the worst it will get. Your lender don't want your home, they just need their money so they can help you out with financing options.

• You should understand your rights during this situation and what your lender can do. You should read all the mortgage conditions properly and can also contact state government office for further information as different states have different laws. Learn as much as you can about foreclosure prevention. You can also contact lawyers for further help.
  

• You can contact HUD approved counselors for help. They are experienced government officials who can help you out in understanding the laws in your state and and will help you in recognizing available options. They can also deal with the lender if you need help.

• Spend your money wisely. You should avoid spending money on unnecessary things. Your main priority should be paying your mortgage payments. You should also use your assets wisely. You should understand what you can sell to raise your cash.
  

Applying for $8,000 tax credit

• Single buyers should have an income less than $95,000 and married buyers should have an income less than $170,000 to be eligible. For full tax credit single buyers should have an income less than $75,000 and married buyers should have an income less than $150,000. Others can apply for reduced tax credit.

• Tax credit incentive is for first time home buyers only. People who have not owned a primary residence for the past 3 years are also considered as first time home buyers.

• 10% of the purchasing amount of the home is provided as credit which cannot exceed $8,000. This money can be used for down payment for buying a home.

• All types of homes including single family homes, condominium units and also manufactured homes are eligible but they should be used for primary residence.

• Closing date should be after January 1, 2009 and before December 1, 2009 to be eligible for full tax credit.

Recapture Tax

Many benefits are provided to first time homebuyer and who apply for FHA financing for buying a home. These benefits include loans on low interest rates and also funds for down payment assistance. These programs are governed by Federal laws. There is "recapture" tax to pay if the borrower meets the following conditions:

• Borrower sells the property within nine years of ownership.
  
• There is a net profit on the sale of the property.
  
• There is a increase (5% per year) in the income of the borrower.
  

But, the borrower don't have to pay the recapture tax if,

• the property is sold after nine years of ownership.
• there is no profit by selling the property.
  
• no increase in the salary of the borrower.
  
• the house is destroyed by any natural calamity.
  
• transfer of property to the spouse or ex-spouse as an agreement of divorce.

Buying a home after bankruptcy

Buying a home after filing bankruptcy is quite difficult. It affects your ability to take a loan in the coming months and sometimes in years but if you take proper steps then you can purchase a home after 18-24 months of filing bankruptcy. You have to wait until your bankruptcy case has been decided.

After bankruptcy, the most important step to take is to rebuild your credit scores. You must keep your credit scores perfect after bankruptcy and should have a steady job. Keeping credit scores perfect for nearly two years will bring back the faith of lenders in you. You have to prove to lenders that you can be trusted on paying back the money you owe. For this, you can apply for "installment loans" which can include student loan, car loan etc. and the only thing you have to do is pay your installments on time.

After improving your credit scores, you can go for FHA home loans as FHA requirements are flexible.

• two years have passed since bankruptcy have been discharged.
• three years have passed since a foreclosure
• all the judgments have been paid.

Your first home loan after a bankruptcy may be available to you on higher interest rates but if you can manage large down payment then, you can get loan at low interest rates.

Common misconceptions about reverse mortgage

# 1: Lender owns your home - False

This is the biggest misconception about reverse mortgage. Borrower owns the home as long as the home is their primary residence. Borrower's need to pay back the loan, when they leave the home.

# 2: Borrower can end up owing more than the value of the home - false

One of the biggest advantage of reverse mortgage is that the borrower can never owe more than the home's value even if the borrower has borrowed more than the value of the home.

# 3: Borrower's home must be debt free - false

It is not necessary that your home must be debt free or there can't be any mortgage on the home. Borrowers can go for reverse mortgage as long as the debt can be paid with some part or all of the funds of the reverse mortgage.

# 4: There are restrictions on the use of money obtained from reverse mortgage - false

There are no restrictions on the use of the funds. You can use the funds for a holiday, paying your debts, paying college fees of your children, anything.

Importance of FHA home inspection

Every home buyer should go for a FHA home inspection. When you want to buy a home, you want the home to be in proper condition. You don't want to face any problems in future or spend thousands of dollars in repair works. Getting a home inspection from a trained expert before buying a home is an intelligent step.

A home inspector will evaluate all the physical conditions of the home including construction, structure and mechanical systems. A inspector will also evaluate the working of major equipments (plumbing, air conditioning, electrical etc.) Inspector will provide the buyer with the detailed information about the home and any repair works that are needed in the home.

One thing home buyers should understand is that the home inspector will not evaluate the value of your home. Home inspection is different from an appraisal. Appraisal provides you with the estimated value of the home which is required by the lender before your FHA loan approval so that you don't borrow more than the value of the home.

FHA loans vs. Conventional loans

FHA loans have many benefits when compared to conventional loans. There are many benefits for the borrower and also for the lender as FHA loans are less riskier for the lenders as the loans are insured by FHA.

• Down Payment: For FHA loans only 3% down payment is required, while for a conventional loan minimum of 5% down payment is required and it can go up to 15%.

• Credit Scores: For conventional loans you require perfect credit scores while credit score is not an issue if you are applying for a FHA loan.

• Monthly Mortgage payments: It is less in FHA loans as compared to conventional loans.

• Property standards: FHA has certain property standards while conventional loans don't have any property standards. FHA Homes should be inspected properly and should be perfect for living.

Also, you can apply for a FHA mortgage loan after two years in case of a foreclosure and after three years in case of a bankruptcy.

Advantages of FHA streamline refinance

Advantages of FHA streamline refinance are:

• Biggest advantage of FHA streamline refinance is that there is no appraisal required. Most people don't qualify because there homes don't enough value, but if your qualify for streamline refinance, then it is not an issue for you.

• Most of the mortgage loans have high closing costs but FHA streamline refinance have very low closing costs.

• FHA streamline refinance can be wrapped up quickly as no appraiser to visit your home or verification of your employment as once you qualify for a FHA loan, these qualifications are carried over to FHA refinance mortgage.
  

• Another big advantage of streamline refinance is that "no income verification", so you don't have to worry about your income if it has been dropped.
  

Common myths of FHA loans

Myth # 1 - Government loans the money

Most common myth about FHA loan is that the loan is provided by the Federal Housing Administration (FHA) which is not the case. Government only guarantees for your loan and because of this guarantee, these loans are less riskier for the lenders or banks.

Myth # 2 - FHA loan takes longer to get approved

FHA home loans take no longer than other conventional home loans if you are properly guided by FHA loan officer who understands FHA mortgages completely.

Myth # 3 - Credit Score doesn't matter

This is neither completely true neither completely false. You must have a strong credit history for the past 12 months or so. You should have made all your payments on time without any delay. FHA may also look at your phone bills, rent and other bills to know credit worthiness.

FHA appraisal

FHA appraisal is a critical component of an FHA mortgage to determine the market value of the home. This market value serves the basis for the maximum FHA insured mortgage loan. FHA appraisal is done for the benefit of the lender and HUD and apart from determining the home value, it als0 provides an examination of the property for any defect that can be harmful for the people living in the house.

FHA appraisal determines the accurate value of the home to be financed which minimizes the risk of the lender because if the borrower defaults on the loan, then the home will provide the means of recovery for the lender. HUD requires appraisals for all FHA insured mortgages. FHA does not take guarantee that the home is in perfect condition but it ensures that the home is in safe and secure condition. Also, the home must meet all the FHA requirements.

FHA appraisers are required to repair or replace anything that affects the safe habitation of the house. FHA appraisers are required to make a complete inspection of the home, both from inside and also from outside. FHA appraisers must ensure that each and every thing is perfect may be its hand-rails, windows, smoke detectors, condition of the roofs and the kitchen. They must check whether all the components are working properly or not.

So, before buying a home, have a proper FHA appraisal so that any defects in the house can be repaired on time.

Tips to secure your FHA home loan

There are certain factors that you must keep in mind to secure your FHA home loan. Below are some simple tips on how you can secure your FHA insured mortgage.

• Credit score is the most important factor. You must clear your previous debts and should increase your credit score before going for the mortgage.

• You should not increase unnecessary debt using credit cards. You must limit its use and your spending money should be cash.

• You should consider your present financial conditions. If you don't have much savings and a good career then first you must improve your financial standing before buying a home.

• You must completely understand the procedure of the FHA loan processing and also pros and cons of the market before applying for the loan.

• You should compare the interest rates and the loan program of several lenders before finanlizing the loan.
  

FHA loan guidelines

When you apply for FHA loan to buy a home, there are certain guidelines that you must meet. Among them most important are your relative mortgage amount and your income. FHA does not want that your mortgage payment (includes principal, interest, taxes) to be more than 31% of your gross income and also your monthly debt obligation including mortgage should be not more than 43% of your income.

You must collect all information and put them in a file send it to an underwriter. The underwriter decides whether you are approved or rejected after reviewing your file. You should understand what are the important information that you must include in your file.

SOME OF THEM ARE:

• Social Security Number
• Address of your residences for the past two years
• Information of your employer for the past two year
• Current gross income
• Complete information about your bank accounts
• Detail of any property you owe.
• estimated value of the home.

FHA closing costs

when you buy a home, there is always a closing cost apart from the down payment. These closing costs are charged to the buyer and are considered allowable and these costs are necessary to close the loan.

The closing cost and other fees that you can finance in your mortgage are:

• Loan origination fees.
• Any credit report costs required for FHA mortgage.
• Appraisal fees which is used to determine home-value.
• Costs included with the title.
• Recording fees and taxes associated with the purchase of the home.
• Deposit verification fees.
  

Advantages of Jumbo Mortgage

Jumbo Loans are simply loan amounts above normal loan amount. Individuals applying for jumbo loans are very rare but they provide borrower with many advantages.

• Simply, it provides you with greater amount of money, and there are no restrictions on the use of money.

• Expensive real estate cost make you to take out a jumbo loan. In some part of the countries real estate costs are very high and jumbo mortgages are the only alternative.

• If you apply for jumbo mortgage for buying a home then the interest paid will be tax-free so you can save substantial amount of money.

Jumbo loans

Jumbo loans are above the maximum loan amount set by Freddie Mac and Fannie Mae. They have a little higher rate than conforming. Jumbo loans are securitized by other institutes than Freddie Mac and Fannie Mae. Jumbo loans are proves to be more riskier to lenders because as the loan limits are very high and if the borrower defaults on the payment, it will be difficult for the lenders to sell luxury homes at high prices.

Due to high risk associated with Jumbo loans, lenders prefer higher down payment from the borrowers. Interest rates charged on a jumbo loan is usually higher than a loan that is conforming. Refinancing a jumbo loan can be costly due to high closing cost. You should seek advice from different authorized lenders about jumbo loans, before applying for it.

FHA loan processing

FHA loan processing is the most important part of your loan process. You must verify your file from any FHA approved lender to check whether all the documents are in order or not. You can add if any documents are missing. Following steps are taken while your FHA loan file is processed.

• Employment verification: Your form is sent to your present and past employers to verify your job and income for the past two years.

• Deposit Verification: Your form is sent to your banking institutions to verify your account balance for the past three months.

• Letter of Explanation: A letter of explanation written by the borrower explaining any issues regarding credit scores, bank account deposits, source of funds etc.

• Appraisal: It is ordered by a FHA approved appraiser, who will visit the property and verify it for FHA requirements, size of the property and will determine the value of the home.

• Additional documents: Some additional documents may be required depending on your case scenario. These documents vary for every individual's scenario.
  

Advantages of FHA refinance

• FHA refinancing can assist you with the funds or money you need to make necessary repairs in your home. With the funds, you can also expand your home and can also renovate it.

• You can lower the interest rate of the loan by refinancing the mortgage with a lower interest rate program.

• As the interest rates are lowered, so are your monthly payments and you can save significant amount of money.

• You can adjust the time period of the loan by refinancing. You can increase the period of the loan or can also decrease the period of the loan.

• FHA refinancing don't need any extra amount or cash. And, if the refinancing doesn't cost you anyhting then you can save a lot amount of money.
  

Things you should consider before applying for Reverse Mortgage

As you all know, Reverse Mortgage is a loan provided to senior citizens against their residential property and the home equity is converted into the cash. But before applying for FHA insured Reverse Mortgage you must consider the following points:

• First of all, you should go for a counselling. It acts as consumer protection and requires a third party to understand the program completely. You can contact local HUD-approved counselling agencies or national agencies and can be done on phone or face to face.

• You should consider for other options apart from a Reverse Mortgage. Because these loans are costly, and if you intend to leave the home in few years then it is advisable not to go for a Reverse Mortgage.

• Usually Reverse Mortgage does not affect your social security benefits. But, the fund you receive must be used in the same calender month only. If you retain the funds then it will counted as assets and can affect your Medicaid and social security benefits.

• You can apply for Reverse Mortgage even if you already have a mortgage but the money you recieve should be used to pay off the mortgage first as Reverse Mortgage must be in first lien position.
  

Advantages and disadvantages of Second Mortgage

Second Mortgage also known as home equity loan is simply an additional loan against your property. Lenders consider these loans as riskier because first mortgage should be paid so these loans are provided on high interest rates.

ADVANTAGES

• You can get cash easily as these loans are provided on your home equity.
• Funds you receive can be used for any purpose.
• Second Mortgage does not affect your first mortgage.
• You get tax benefit on the interest you pay on the second mortgage.

DISADVANTAGES

• If you default on the payments, the the lender of the second mortgage can foreclose your home.
• Lenders charge higher interest rates as compared to first mortgage.
• You must have good credit scores to be applicable for the second mortgage.
  

Second Mortgage

Second Mortgage is another loan against your property. Second Mortgage proves to be more risky for the lenders because if the loan goes into default then the first or original mortgage will be payed off first. Second Mortgages are available on higher interest rates as compared to first mortgage. When you apply for a second mortgage, lenders look for the following points:

• Equity on the first mortgage
• your credit score
• your employment

These loans are useful when you need a lot of money. These mortgages allow for higher loan as loan against a home is considered safe. Time period for a second mortgage may vary but its is usually for 30 years but repayment may be low. Second Mortgage can turn into a foreclosure if you default on the loan payment.

FHA insured Mortgage

FHA insured mortgages is easily available in both rural and urban areas for single families or 1-4 unit homes. To get FHA insured mortgage you must apply to HUD approved lenders only. FHA Rates are same as conventional loan rates but there is low down payment(3-4%). There are different types of FHA insured Mortgage available:

• Section 203(b): This is the most common and most popular program available. This program can be used to buy a home for single family or 1-4 units home and also manufactured homes and you can pay a fixed mortgage in 15-30 years in monthly payments.
• Section 234(c): This program is available to a person who is purchasing a unit in a condominium building. Any owner-occupant with good credit scores and will make the condominium unit permanent residence is eligible.
• Section 203(k): This program is for home improvements. It allows you for FHA refinance or improving a home build or sold 1-2 years ago.
  
• Section 237: This program is designed for people who have bad credit scores and want to buy a home and get home ownership.
  

Documentation for a FHA loan

Your FHA loan completely depends on your documentation. If you provide complete and right documents about yourself then your FHA loan is approved quickly and also you don't face any problems in future. Your documents must include:

Employment Information: this will include your 2 years of tax returns and if self-employed than you need to provide 3 years of tax returns with profit and loss statement.

Saving Information: Complete bank statements for 2 months for all your accounts and also recent statements about your stocks, mutual funds etc.

Credit Information: most recent bill statements with minimum payment information and also account number. Complete information about your landlord. If you have zero credit than most recent electricity bill, phone bills or any other loan statements.

Personal Information: Driving license, social security card, if you are applicable than green card and also your work permit.

If you own a home or making a FHA refinance than provide documents of property tax bills, homeowners insurance policy, complete information about current loan. These are the necessary documents you will need for a FHA insured mortgage. Other documents may be asked after your FHA loan file is processed.

FHA streamline refinance

FHA streamline refinancing is a great option for home owner's to decrease their interest rates and monthly payments and most of the times without an appraisal but no-appraisal loans cannot exceed your current loan. To qualify for a FHA refinancing you must have a FHA insured mortgage. The loan on which you are refinancing must be current and with good standing and must have been opened 6 months prior to refinancing.

For a FHA refinance you don't need any income verification or any other fund verifications. Also it does not require any credit reports. You can also increase or decrease the period of the loan. The extra cost can be covered by the lender by slightly high interest rates or by adding the amount to the current loan if there is sufficient equity in the home.

Pros and Cons of Reverse Mortgage

Reverse Mortgage is interestingly becoming a favorite choice among senior citizens. They can convert the home equity into money by applying for a reverse mortgage. But, they usually look at the bright side of it. Here, are some pros and cons of reverse mortgage

Pros

1. Main advantage of the loan is that even if you outlive the loan and your equity become zero, then also you can live in your home.
2. The money you get is tax-free.
3. There are no restrictions on the use of money. You can spend it on a vacation, your daily needs, college fees of children etc.
4. Reverse Mortgages are FHA insured mortgages. Even if your lender default, then also you will get the payment.

Cons

1. If you receive medicaid, SSI or other public benefits then you cannot keep the money in account for saving as it will be counted as "liquid assets" and you may loose your eligibility for these benefits.
2. If you plan to move to new residence in few years then it is advisable not to go for it as the loan is due only on permanent residence and the closing cost are usually very high.
3. Minimum age required is 62 years.
   

advantages and disadvantages of FHA loans

FHA loans are a good option for first time home buyers. These loans are FHA approved so, you can get the loan on low interest rate. But, there are some advantages and disadvantages of FHA financing.

ADVANTAGES

1. Cash down pyment required is less as compared to other conventional loans.
2. Easy interest rates for you to buy a home.
3. No penalties if you pay all or part of the loan before the scheduled time.
4. Credit score is not a major factor to qualify for the loan.

DISADVANTAGES

1. FHA loans require that the home you buy must be your permanent residence. You cannot rent the home.
2. Approval time for FHA loans are longer as compared to conventional loans.
3. Maximum money you can borrow is less compared to conventional loans.
4. Monthly Insurance Premium (MIP) between 2-3% of the total loan is required.
   

Mortgage Calculator

Mortgage Calculator helps you in calculating your monthly mortgage payment, your loan amount, time period etc. It just helps you in calculating anything you want to determine about your mortgage loan. Mortgage calculator can also be used to compare cost between different loans.

Mortgage calculators can help you in saving you thousands of dollars if you already know about the mortgage payments and the amounts by comparing different loans and choosing the best one for yourself. Many variables are included in calculating your query but the major variables are principal balance, payment amount, length of the loan and the interest rate.

Reverse Mortgages

Reverse Mortgage is a loan available to senior citizens who are above 62 years of age and owns a home with home equity. This home equity is released as one lump sum amount or multiple payments according to the borrower's choice.

Reverse Mortgages are really beneficial as it provides financial stability to senior citizens. The loan is paid back when the home is sold, the owner dies or the owner moves away. To qualify for the loan, there is no minimum income or credit required but you must qualify on other factors. Amount of money that can be borrowed depends on the following factors.

• Age of the borrower (older the senior, the more money he/she can borrow)
• Interest rate
• Appraised value of the home.

All these factors together determine the amount of money that can be borrowed by the seniors. Before applying for the loan you can consult FHA or HUD as they can provide you with proper guidance.

Do I qualify for FHA loan?

FHA loan is specially designed for low income people for whom buying a home at conventional rates is not affordable. FHA loan are most flexible and easy to qualify and are available at low down payments of 5-10%.

at conventional rates is not affordable. These loans are approved by the government so lenders provide these loans at easy rates.

• You should have a steady job with same employer for the past 2 years.
• your income for the 2 years should be same or increasing.
• If you have been bankrupted, then it must be 2 years old and since then you must have proper credit scores.
• You must provide complete information about your employment with complete tax return schedules.
• you must provide bank statements of your savings and your recent credit information and also your personal information.
  

FHA home loans or FHA refinance are easier as compared to other mortgage plans and also very affordable at government guarantees these loans.

Do i qualify for FHA loan?

FHA LOAN

FHA loans are beneficial for lower income people which helps them in buying a home. It usually serves those people who cannot afford conventional down payment. FHA or HUD does not provide loan to people, rather they guarantee your loan with their approved lenders. As these loans are guaranteed loans, FHA loan is provided by the lender on less interest rates.

There are certain requirements that you must meet before applying for a FHA home loan. some of them are:

1. You must have the same job for the last 2 years, with the same employer.
2. Your income in the last 2 years must be same or should be increasing.
3. you must provide complete details about your employer, savings, credits etc.

FHA home loan money can be used to buy a home, repair your home or remodel it. But, it is necessary that you should live in the same home you have bought, you can put the home on rent and can live in some other home.

Mortgages...

HELLO FRIENDS,
Mortgage is transfer of interest in property to a lender as security for the loan. The interest is returned to the home owner once all the conditions of the loans are satisfied. Usually, mortgages are provided on real estate only. Mortgages usually provide financial stability to the borrower and the lender can exercise the right only if any of the conditions of the mortgage are violated.

FHA loan program provides easy loan as compared to other mortgage programs. Rate of interest is very less and also the credit score required is less. You can easily qualify for FHA loan program as the terms and conditions required are easy.