Getting a home equity credit line.

Getting a home equity credit line.

1. Not checking to see if your credit line has a pre-payment penalty clause.
       If you are getting a "NO FEE" credit line, chances are it has a pre-payment penalty clause.  This can be very important (and expensive) if you are planning to sell or refinance your home in the next three to five years.
   
2. Getting too large a credit line.
       When you get too large a credit line, you can be turned down for other loans.  Some lenders calculate your credit line payments based upon the available credit, even when your credit line has a zero balance. Having a large credit line indicates a large potential payment, which makes it difficult to qualify for loans.
   
3. Not understanding the difference between an equity loan and a credit line.
       An equity loan is closed--i.e., you get all your money up front, then make payments on that fixed loan amount until the loan is paid.  An equity credit line is open--i.e., you can get an initial advance against the line, then reuse the line as often as you want during the period the line is open.  Most credit lines are accessed through a checkbook or a credit card.  Credit line payments are based upon the outstanding balance.
       Use an equity loan when you need all the money up front--e.g. home improvements or debt consolidation.
       Use a credit line if you have an ongoing need for money or need the money for a future event--e.g., you need to pay for your child's college tuition in three years. 
   
4. Not checking the lifecap on your equity line.
       Many credit lines have lifecaps of 18%.  Be prepared to make high interest payments if rates move upwards.
   
5. Getting a credit line from your local bank without shopping around.
       Many consumers get their credit line from the bank with which they have their checking account.  Shop around before deciding to use your bank.
   
6. Not getting a good-faith estimate of closing costs.
       Within three working days after receipt of your completed loan application, your mortgage company is required to provide you with a written good-faith estimate of closing costs. 
   
7. Assuming that the interest on your home credit line/loan is tax deductible.
       In some instances, the interest on your home credit line is NOT tax deductible.
       It is beyond the scope of this document to provide tax advice or quote from the IRS code.  Contact an accountant or CPA to determine your particular situation.
   
8. Assuming a home equity line is always cheaper than a car loan or a credit card. 
       A credit card at 6.9% can be cheaper than a credit line at 12%, even after the tax deduction.  To compare rates, compare the effective rate of your credit line with the rate on a credit card or auto loan.
   Effective rate  =  rate * (1 - tax bracket)
       Example:  If the rate of the home equity credit line is 12% and your tax bracket is 30%, your effective rate is12% * (1 - 0.3) = 12% * 0.7 = 8.4%
       If your credit card is higher than 8.4%, the credit line is cheaper.
       Besides the interest rate, you may also want to compare monthly payments and other terms of the loan.
   
9. Getting a home equity credit line if you plan to refinance your first mortgage in the near future.
       Many mortgage companies look at the combined loan amounts (i.e., the first loan plus the equity line/loan) even though they are refinancing only the first mortgage.  If you plan on refinancing your first loan, check with your mortgage company to determine if getting a second line/loan will cause your refinance to be turned down.
   
10.     Getting a home equity credit line to pay off your credit cards if your spending is out of control!
        When you pay off your credit cards with your credit line, don't put your home on the line by charging large amounts on your credit cards again!  If you can't manage the plastic, get rid of it!

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Buying a home

Buying a home

1. Looking for a home without being pre-approved. 
       Pre-approval and pre-qualification are two different things.  During the pre-qualification process, a loan officer asks you a few questions, then hands you a "pre-qual" letter.  The pre-approval process is much more thorough.
       During the pre-approval process, the mortgage company does virtually all the work associated with obtaining full-approval.  Since there is no property yet identified to purchase, however, an appraisal and title search aren't conducted.
       When you're pre-approved, you have much more negotiating clout with the seller.  The seller knows you can close the transaction because a lender has carefully reviewed your income, assets, credit and other relevant information.  In some cases (multiple offers, for example), being pre-approved can make the difference between buying and not buying a home.  Also, you can save thousands of dollars as a result of being in a better negotiating situation.
       Most good Realtors® will not show you homes until you are pre-approved.  They don't want to waste your, their, or the seller's time.
       Many mortgage companies will help you become pre-approved at little or no cost.  They'll usually need to check your credit and verify your income and assets.
   
2. Making verbal (oral) agreements!
       If an agent tries to make you sign a written document that is contrary to their verbal commitments, don't do it!  For example, if the agent says the washer will come with the home, but the contract says it will not--the written contract will override the verbal contract.  In fact, written contracts almost always override verbal contracts.  When buying or selling real estate, abide by this maxim:  Get it in writing!
   
3. Choosing a lender because they have the lowest rate.  Not getting a written good-faith estimate.
       While rate is important, you have to consider the overall cost of your loan. Pay close attention to the APR, loan fees, discount and origination points.  Some lenders include discount and origination points in their quoted points.  Other lenders may only quote discount points, when in fact there is an additional origination point (or fraction of a point).
       This difference in the way points are sometime quoted is important to you.  One lender will quote all points, while another lender may disclose an extra point, or fraction thereof, at a later time--an unwelcome surprise.
       Within 3 working days after receipt of your completed loan application, your mortgage company is required to provide you with a written good-faith estimate (GFE) of closing costs. You may want to consider requesting a GFE from a few lenders before submitting your application.  With a few GFEs to compare, you can get a feel for which lenders are more thorough, and you can educate yourself regarding the costs associated with your transaction.  The GFE with the highest costs may not indicate that a particular lender is more expensive than another--in fact, they may be more diligent in itemizing all fees.
       The cost of the mortgage, however, shouldn't be your only criteria.  There is no substitute for asking family and friends for referrals and for interviewing prospective mortgage companies.  You must also feel comfortable that the loan officer you are dealing with is committed to your best interests and will deliver what they promise.
   
4. Choosing a lender because they are recommended by your Realtor®.
       Your Realtor is not a financial expert.  He or she may not know which loan is best for you.  Your Realtor® gets a commission only when your transaction closes.  As a result, the Realtor® may refer you to a lender who will close your loan, but who may not have the best rates or fees.  Also, many Realtors® refer you to one of their friends in the loan business--who also may not have the best rates or fees. Although most Realtors® are professional and concerned about your best interests, you should do your own homework.
       We recommend shopping for a loan with at least three mortgage companies before you make a decision.  There are countless stories of consumers who ended up paying higher rates, or got a loan that wasn't right for them, because they blindly followed their Realtor's® advice.
   
5. Not getting a rate lock in writing.
       When a mortgage company tells you they have locked your rate, get a written statement detailing the interest rate, the length of the rate lock, and other particulars about the program.
   
6. Using a dual agent (an agent who represents the buyer and seller in the same transaction).
       Buyers and sellers have opposing interests.  Sellers want to receive the highest price, buyers want to pay the lowest price.  In most situations, dual agents cannot be fair to both buyer and seller.  Since the seller usually pays the commission, the dual agent may negotiate harder for the seller than for the buyer.  If you are a buyer, it is usually better to have your own agent represent you.
       The only time you should consider using a dual agent, is when you can get a price break (usually resulting from the dual agent lowering their commission).  In that case, proceed cautiously and do your homework!
   
7. Buying a home without professional inspections.  Taking the seller's word that repairs have been made.
       Unless you're buying a new home with warranties on most equipment, it is highly recommended that you get property, roof and termite inspections.  These reports will give you a better picture of what you're buying.  Inspection reports are great negotiating tools when it comes to asking the seller to make repairs.  If a professional home inspector states that certain repairs need to be made, the seller is more likely to agree to making them.
        If the seller agrees to make repairs, have your inspector verify the completed work prior to close of escrow.  Do not assume that everything will be done as promised.
   
8. Not shopping for home insurance until you are ready to close. 
       Start shopping for insurance as soon as you have an accepted offer.  Many buyers wait until the last minute to get insurance and find they have no time left to shop around.
   
9. Signing documents without reading them. 
       Do not sign documents in a hurry.  As soon as possible, review the documents you'll be signing at close of escrow--including a copy of all loan documents.  This way, you can review them and get your questions answered in a timely manner.  Do not expect to read all the documents during the closing. There is rarely enough time to do that.
   
10. Making moving plans that don't work.
        You expect to move out of your current residence on Friday and into your new residence over the weekend.  Also on Friday, your lease terminates and the movers are scheduled to appear.
        Friday morning arrives: bags packed, boxes stacked, children under arm and the dog on a leash; you're sitting on your front door stoop awaiting the arrival of the movers.
        Your phone rings.  Your loan closing is delayed until the following Tuesday.  The new tenants turn into your driveway with a weighted-down U-Haul and the movers pull up across the street.
        You ask yourself, "Where's the nearest Motel 6 and storage facility?  How much will the movers charge for an extra trip?  Can we afford it?"
        How can you avoid such a disaster?  Cancel your lease and ask the movers to show up five to seven days after you anticipate closing your transaction.  Consider the extra expense an insurance policy.  You're buying peace of mind--and protecting yourself from expensive delays.

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Debt Management: For Homeowners Only?

The best debt solution for your circumstances depends on a number of things like your income and expenses, your outstanding balances, your employment, and residential status.A debt management plan is an informal debt solution that may also involve budgeting and debt consolidation. The best debt management involves counseling and learning budgeting skills, so that you don’t end up in hot water again. Normally, your counselor contacts your creditors and negotiates lower payments and interest rates on as many accounts as possible. Then you make a single payment to the plan, and the service distributes it to your creditors.

Do You Need to Be a Homeowner?

You don’t have to be a homeowner to start a debt management plan. You just have to show that your current repayments are unaffordable, and that you are able to commit to regular reduced monthly payments.

The advantage of being a homeowner is that you may be able to add debt consolidation to your plan. By taking a home equity loan or doing a cash-out refinance, you could pay off the higher interest credit card debt and lower your payments considerably. Keep in mind that by stretching out your debt over 15 or 30 years you could end up paying more interest over the life of the loan. Still, debt consolidation by home equity loan or refinance can give you some breathing room, and you can always choose to make extra principal payments and lower your interest expense over the life of the mortgage.

Debt Management Education

An expert credit counselor is key–many so-called counselors are just salespeople who push everyone into the same plan. You want someone who provides some budgeting and credit education as well as debt management services. A reputable company should charge $100 or less, spend time evaluating your finanical situation with you, and discuss spending and lifestyle changes first. Streer clear of agencies that give you a hard sell and push a debt management program without offering alternatives. Keep in mind that non-profit status doesn’t mean that a service is any better or lower-priced. You need to evaluate it on its merits. The U.S. Dept. of Justice keeps a list of approved counselors on its Web site.

Debt Management: DIY

It’s possible to arrange a debt management plan yourself. You can negotiate interest rate freezes or reductions with your lenders directly, and if you have a good payment history with them and a documentable hardship, they are often willing to work things out. The process, however, may be time-consuming and stressful, and perhaps embarrassing. That’s why many prefer to have a debt management company deal with the negotiating, paperwork, and distribution of payments.

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Advantages of Refinancing Online?

With the advent of the Internet, people are selling everything online, and there is no exception with a mortgage refinancing. Online there are a plethora of companies out there vying for your business. If you look around and check a company out before sharing your personal information, online mortgage refinancing might be the right fit for you.

Many people are concerned about transmitting personal data over the web. Because of all of the identity theft going on, this is a valid concern. There are some practical ways that you can protect yourself. First of all, when you are considering a company, check them out on the Better Business Bureau's website. This will help you see how they treat their customers. Another thing that is an absolute must is to be sure that they have a secure website. The way you can know this is if you go to their site and the http turns into an https. The s means that it is secure. A secure website is one in which security measures have been implemented to prevent hackers from stealing your information. This may not appear until you are accessing a sensitive area of their site.

One of the advantages of refinancing your mortgage online is speed. There is little need to coordinate schedules or make an appointment. Everything except the closing is done via email or telephone. This is ideal for the busy working person who has little time to spend in a traditional mortgage office.

Another plus is the competitive rates available with online mortgage companies. Because there are so many places competing for your business, you could wind up with a very low interest rate. Many sites will give you quotes from several different firms and you can choose which one you like best. If one company is lower, but you would prefer to do business with another, ask if they will match the lower rate. Many online mortgage companies will do this in order to earn your business.

Getting a mortgage quote online is easy and quick. You can do it from the comfort of your own home, and avoid uncomfortable face to face meetings with pushy mortgage brokers. It is simple to find interest rates online and, many times, they are lower than the rates traditional mortgage companies offer. Just be careful of the quotes that are several percentage points lower than the majority of the ones you have received. If it sounds too good to be true, it usually is. Be sure you are dealing with a reputable company or your great deal may turn into great big headache.

Online mortgage refinancing is a wonderful choice for many people. More and more consumers are turning to the internet to take care of their finances. As a result, many great deals can be found that can better your situation tremendously. As long as you are cautious, refinancing your mortgage online can be a simple, painless and rewarding experience.

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Pros and cons of an adjustable rate mortgage

Many people have heard bad things about ARM, or adjustable rate mortgages, but there are just as many advantages to refinancing your home with an ARM as there are disadvantages. If you are considering refinancing your current home loan, and have a fixed rate home loan at the moment, an ARM loan is definitely worth looking at, as far as saving money on your repayments, and getting a better interest rate goes.

What Is An Adjustable Rate Mortgage?

An adjustable rate mortgage is a home loan that has significantly lower interest rates than any offered fixed rate mortgage at any given time. These adjustable rates on an ARM can change over the life of the loan in accordance with current markets and trends, unlike a fixed rate mortgage where the rates are never subject to change over the life of the loan.

What Are The Benefits?

By far the greatest benefit of refinancing, using the adjustable rate mortgage option is the savings gained by having a lower interest rate. It is hard to believe, but a small difference in interest rates, such as half a percent, over the course of a year can equate thousands of dollars.

What Are The Risks?

There are risks involved when you refinance with an adjustable rate mortgage loan. The riskiest type of ARM loan is the type that has no fixed term attached to it. Although the interest rates will be even lower than the average rates offered on a fixed term ARM loan, the rates on an ARM loan that isn't fixed are subject to change monthly, or yearly. An ARM loan that is fixed for a particular period, such as 5 years, is much safer, because you are getting a very low interest rate, locked in over a period of five years.

Who Will Benefit From An Adjustable Rate Mortgage?

Almost anyone can benefit from a fixed rate ARM mortgage. According to financial statistics many American families either sell their homes, or refinance after four years. If you are like many others, having a 5-year fixed ARM loan there is very little risk, with a much lower interest rate on offer.

The only risk is that after the 5 years is over on a fixed rate, if you can't refinance, or choose not to sell, and interest rates do get higher, you will have to pay more on your repayments. The ARM rate is especially helpful to lower income bracket families, or for those who want to pay their home off quicker than they are already.
By keeping your monthly repayments the same, and refinancing to an adjustable rate mortgage with a much lower interest rate, the money that you are saving because of the lowered interest rates can be coming directly off your principal each month. This can mean you are shaving years off your mortgage, without paying anything more than you were before you refinanced.

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The Mortgage Modification Option

This is a very difficult time for many homeowners. With high housing prices a few years ago, many people chose adjustable rate mortgages in order to be able to qualify for a house they wanted to purchase. Low interest rates made it possible for these higher-priced homes to be affordable for many people who may not have been able to afford them otherwise. At the time, house prices were rising quickly, so it was common that people who purchased a house found that the value of their home increased substantially over the course of just a few months. Mortgage companies also came out with additional programs that allowed even more people to qualify for loans that they may not otherwise be able to afford.

All of these factors combined to create what was called a housing bubble, which eventually popped. Interest rates rose. House prices dropped. Many people who had opted for two- and three-year ARMs saw their mortgage payments go up, often so much that they could no longer afford them. Foreclosures increased and are continuing to do so. Many mortgage companies have ceased operations or had to lay people off, leaving thousands of people jobless.

For people who have equity in their homes, and have been in their homes long enough, refinancing is an option that many people have been able to take advantage of.

If, however, you purchased your home at a time when prices were at their peak and now owe more on your home than it's currently worth, or if you haven't been in your home long enough, you may not qualify for refinancing. In this case, you may think you don't have any options. Some people in this position think that their only option is to sell their home for much less than it's worth or lose it through foreclosure.

There is an option that many people in these desperate financial circumstances don't realize exists. It's called a mortgage modification.

A mortgage modification is an option that you can request through your current mortgage company. You aren't refinancing to a whole new loan. You are asking for a modification of your existing loan. Not all mortgages can be modified, so you will need to discuss this with your mortgage company.

One way that some mortgage companies will modify your mortgage is to arrange what is called a forbearance, which means they will allow you to skip a payment or two. This is something that some mortgage companies will agree to if you're having temporary financial difficulties, but can get back on your feet quickly.

Another way that some mortgage companies will modify your mortgage is to extend the loan for another five years. This will help to lower your monthly payments.
You can also ask if they would be willing to adjust the interest rate if your adjustable rate mortgage is getting ready to reset.

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Signs That Refinancing Your Home Is A Good Idea

People across the nation are trying to determine whether now is a good time to try to refinance their home or if they should wait for a more favorable financial climate. Refinancing your home at the right time could result in great financial gains and more financial freedom for you at a time where a global credit crunch is making it much harder for some individuals to receive alternative financing options to purchase the items that they desire. On the other hand, refinancing your home at the wrong time and in the wrong financial climate could result in the individual getting in over their heads on their mortgage and could ultimately end in financial devastation, as many homeowners across the nation are now discovering as their homes face foreclosure.

So how do you know whether now is the right time to refinance your home? There are a several signs that the homeowner can look for to determine whether or not the financial climate in their area will make it worth their while to devote the time and energy to refinancing their home. These signs are easy to spot if you know what you are looking for and keeping an eye out for the signs will ensure that you refinance your home in the best financial climate possible.

Sign #1 – You Qualify For A Much Lower Interest Rate
Individuals that purchased their home when their credit was less than stellar often received a higher interest rate than they wanted for their mortgage. If you have repaired your credit and raised your credit score by a significant amount, then you may be able to qualify for a lower interest rate on your mortgage if you refinance. It is important to make your choice carefully and only refinance if the interest rate on your mortgage will be lowered by a significant amount, generally more than 2% which will not make much of a difference in your monthly payments.

Sign #2 – You Signed Up For An Adjustable Rate Mortgage
Many individuals today are deeply regretting the fact that they signed up for an adjustable rate mortgage that seemed so attractive on paper, but is wreaking financial havoc on their lives now that their rates have begun to rise. In the beginning, exotic adjustable rate mortgages were much desired because they allowed people to purchase a bigger home than they could typically afford and had a lower monthly payment, but when the interest rate rose on the mortgage, many people found that their payments had reached an unmanageable level. If you can qualify to refinance your home with a fixed rate mortgage without being subjected to numerous fees and penalties, you may be able to save a great deal of money over time on your mortgage payments.

Sign #3 – You Intend To Improve Your Home
Refinancing your home to obtain equity to improve your home will pay off in the long run as the improvements increase the value of your home. Using the equity in your home to pay for vacations or plastic surgery is generally a waste of money because it will take such a long period of time to rebuild the equity in your home, much longer than if you just put a little money aside to pay for the item in the future. If you are unable to afford to put money away to save for the purchase because your finances are stretched thin, then you probably should not be making expensive additional purchases anyway and taking equity out of your home will only make the situation worse.

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Tax Benefits of Refinancing

The tax benefits of home ownership can potentially save you hundreds of dollars every month. With a little planning you can make sure the dollars you save in refinancing your mortgage stay in your pocket. You might just discover previously unknown tax deductions along the way.

Itemized Deductions
In the early years of the life of a loan, payments are mostly on the interest owed rather than on the principle. If you itemize your deductions instead of using the standard deduction, you might stand to benefit . If you and your spouse file jointly, you can deduct interest payments to a maximum of $1 million. For example, let's say your original mortgage was $300,000. You might take out a new $350,000 refinanced mortgage and pay two points, or $7,000. (A point is an interest charge equal to 1% of the total loan amount that is paid upfront on the close the loan.) As seen by the Internal Revenue Service, the first $300,000 of your new loan is treated as home-acquisition debt. The interest paid on this debt qualifies as an itemized deduction. The $50,000 balance of the new loan is treated as home-equity debt and also qualifies as an itemized deduction. You can amortize the home-acquisition-debt points over the life of the loan. The points related to the home-equity debt can be amortized in the same proportion as the interest, but make sure the home-equity debt is $100,000 or less and the value of the home isn't exceeded by the acquisition debt plus the home-equity debt.

Home Improvement
If your refinanced mortgage is more than your original loan, you can use the difference to improve your home and deduct a dollar amount equal to the percentage of points paid in the first year. Anything within reason that improves your property value, such as improving the back deck or repairing the driveway, can count towards the deductible interest. Interest taken out for expenses not related to home improvement can also be taken as a deduction, but only within certain guidelines. But remember, the maximum deduction in 2007 for the life of the loan is $100,000.

Amortization: Pros and Cons
The points you'll pay when you first purchase your home are deductible in the tax-year in which the property was purchased. For example, if you paid one point on the origination fee of your new $300,000 home, your tax deduction that year will be $3,000. When you refinance your mortgage, the deduction for the amount paid will be amortized over the course of the loan, but the savings will still add up. Returning to the example, if you pay two points on the $350,000 loan when you refinance, the tax deduction of $7,000 would be amortized over 30 years. But, if you decide to refinance again, or you sell the house, you can write-off the unclaimed portion of the deduction. Additionally, i f you have refinanced before, you might have unamortized points that would be allowed in full the year you refinance.

You can learn more about the tax benefits of mortgage refinancing from the IRS Publication 936,Home Mortgage Interest Deduction , and by c ontacting your local tax advisor.

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Bad Credit Refinance - Is it Possible?

With the current state of the economy, many people wonder about bad credit refinance - is it possible? Is it even desirable? Here to help sort out fact from fiction are a few tips on the pros and cons about bad credit refinance.

Tips on Bad Credit Refinance

Fiction: It's impossible to refinance today because banks aren't lending.
Fact: Bad credit refinance is still possible even in a difficult economy. Just keep in mind, without good credit you may not qualify for the best rates. However, that doesn't mean you won't save money. Many people with bad credit still save money or reduce their monthly bills by refinancing.

Fiction: Refinancing always makes sense.
Fact: Not everyone benefits from refinancing; in fact, for some people it can cost much more to refinance rather than pay down the terms of the original loan. Always calculate the full cost of refinancing, including closing costs and fees, and not just the monthly savings.

Fiction: Bad credit refinance ends up costing more in closing costs and other fees than it is worth.
Fact: Shop around for the best terms and rates to find a loan that fits your needs. Many people find they are able to recoup the cost of refinancing the loan within 1-3 years or even less.

Fiction: Bad credit refinance isn't a good idea because the government might not be willing to help once funds become available.
Fact: Following the mortgage crisis of 2009, the government made special funding available. As of 2010, only a few hundred people have taken advantage of the HOPE loans and other government sponsored initiatives. Currently there isn't any way of knowing what qualifications and criteria will be necessary in order to obtain assistance at a later date; on the other hand, locking in a solid fixed interest rate today assures your financial obligation is stable no matter what takes place in the future.

Fiction: I will be required to pay a lot of money out of pocket in order to refinance my home.
Fact: It is often possible to refinance with little to no money out of pocket. Closing costs and other expenses are easily rolled into most loan packages making it as affordable as it is easy to start saving money almost immediately. Just keep in mind, while it is simple to roll expenses into the closing cost it isn't always desirable since you will be effectively financing them for the entire term of the loan. If you are able to pay for closing costs and other fees out of pocket it is often preferable to do so when doing a bad credit refinance.

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The Home Affordable Modification Program, Bank of America & Your Home

Fortunately, the federal government has initiated several programs and a lot of incentives for homeowners. The Home Affordable Modification Plan (HAMP), for example, is something that will allow you to qualify for a lower monthly payment through loan modification.

All you need to do is determine if you qualify for HAMP, submit an application with a loan servicer, ensure that your debt-to-income ration is at least 31% and undergo the income verification process and trial period.

Things to Remember when Applying for HAMP through Bank of America

Since the option to modify your loan through the HAMP program was introduced as part of President Barack Obama's stimulus plan, a lot of homeowners lined up to take advantage of it. The problem is that if you are applying for the program through financial institutions like the Bank of America, there are a lot of instances when the application gets denied.

What if you're already facing a foreclosure and your HAMP application through the Bank of America got denied? This is a scenario which is less-than-desirable - so in order to counteract the frustrations that you might feel during the process, here are a few things that you need to keep in mind:

1. Exercise a lot of patience during the application process.
Did you know that there are a lot of homeowners who applied for the HAMP loan modification program for two to more than five times? At one point or another, their reapplication got approved - although if you're the impatient type, you may not reach this point as a result of being frustrated.

What's important is to make sure that you are aware that it is possible to turn no into a yes - as long as you put your financial records in order to increase your chances of having HAMP approved the second, third, fourth or even fifth time around.

In relation to this, it would also help if you will treat the loan services with friendliness and patience - having the right attitude simply makes going through the process feel a lot better.

2. Make sure that all the necessary paperworks are in order.
One of the most common reasons why HAMP applications get denied in the first place is that applicants do not submit all the necessary paperwork. To increase your chances of getting approved, make sure to submit all the requirements needed for the income verification process.

3. Escalate your request from one level to another if you need to.
Again, as a result of the President Obama's stimulus plan, financial institutions like the Bank of America got flooded with HAMP requests. So it is no wonder why a lot of applications end up getting denied. If this happens to you and you know that you qualify for the loan, don't hesitate to escalate your request from one level to another. Make follow-up calls and learn about the loan application process inside out.

Information is definitely the key if you are facing a prospect as serious as a foreclosure. The good news is that with programs like HAMP, you can take advantage of the federal government-initiated programs that will make paying for your home loan a lot easier on your household budget - so that you can save money and keep your house at the same time.

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Home Refinance Advice

When it comes to a home refinance, things aren't always as easy as they may initially appear; learn how to protect yourself and get a great rate with this easy to use home refinance advice

Home Refinance Advice

1. Work with a solid lender. With the recent banking crisis it can be difficult to know which company is solid and which isn't. Take time to verify the credentials of the refinance lender and follow-up by making copies of all paperwork, communication and other transactions. In the event of a problem, you will have the information required to prove your position.
   
2. Don't fall for scams. Always verify the credentials of any home refinance provider prior to relating sensitive information including social security number, banking or credit scores. It's a good idea to check with the Better Business Bureau or other consumer regulatory agency in your state to confirm the agency is in good standing and eligible to write loans. Never do business with a company that requires large up-front fees to gain information or anyone that makes promises that sound too good to be true. Know what typical closing costs and other refinance fees will be before you sign.
   
3. Speak to a credit counselor. If you are interested in home refinance as a way to reduce monthly debt, it may be advisable to speak with a credit counselor first. Sometimes it is possible to restructure or modify current loans or debts to make them more affordable without having to refinance. Depending upon your specific situation, loan modifications, extended payment plans or other payment options may be less costly in the long run and provide the same relief for a fraction of the cost. Remember, the time to act is before you are in serious financial trouble. Plan ahead in order to keep all your options open and then make the best decision for your situation.
   
4. Get it in writing. Refinancing is a complex transaction where time is of the essence; everything from rate locks to points paid are subject to change so always be sure to get everything in writing. Never rely upon verbal approval only. In the event of a problem you will not have sufficient proof to substantiate your position.
   
5. Make copies of everything. You have probably heard the saying to err is human. Well, it certainly holds true when dealing with any type of paperwork. During the course of a mortgage or home refinance you will be required to submit many types of forms and documentation. Take a few extra minutes to make a copy of everything just in case it is needed later. Not only is it a great way to stay organized but it may help prevent the late submission of paperwork required to get the best rate.

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What Are Some Average Closing Costs?

When you are considering buying a home, you may wonder what are the average closing costs to get that home. Many want an idea of how much to save for these costs. It would be a shame to have the down payment saved for and then find out you need more money saved for the closing. This article will talk about what are some of those average closing costs.

First let us discuss there are two types of closing costs. You have non-recurring fees which are your one-time fees associated with closing your mortgage and those recurring costs that are also called prepaids. Many times non-recurring fees can be negotiated. Whereas the prepaids usually are not negotiable.

Remember you can only get an idea of the costs for these fees. From place to place they can be different. So do not look at these prices as set in stone. They are just to give you a picture of what to expect. You should find these listed on your Good Faith Estimate.

Below are a list of some of those non-recurring one-time fees for home closing costs:

• Application Fee - This is a fee that the lender requires to get your application started. This fee can include your credit report. They can range from $100 to $400. This fee is negotiable.
• Origination Fee - This fee is for the work of preparing your loan and is sometimes referred to as "points". Your loan officer is usually paid from this fee. You can expect a range of 1% to 5% (or 1 to 5 points) of the loan amount for this fee. Definitely negotiate this fee.
• Mortgage Discount Points - The name for this fee can be confusing. When you hear the word discount you think you are getting a bargain or something being lowered for you. These fees are paid to buy you a lower interest rate. So it is money you put up front to lower your rate. In a since it is a bargain when you consider you will pay less interest for your loan. Where it is confusing is you put money up front to get this bargain. Mortgage discount points can range from.5% to 2% of the loan amount. Be sure to negotiate this fee.

Now consider those average closing costs that are recurring costs, referred to as prepaids:

• Property Taxes - Depending on when you close your loan and when the seller paid his property taxes, you may have to give the seller back some money. How does this work? Keep in mind taxes are paid in advance. So if the sellers taxes were due February 28th and that paid him until July 31st, but you closed on the home May 30th. You would then owe from May 30th to July 31st to the seller. But that may not be all, the lender may collect from you the taxes due for the remainder of the year, that is from July 31st to December 31st at the closing. See why these are called prepaids! These costs cannot be negotiated. Although some sellers are willing to help in this area to help with closing the loan.
• Homeowners Insurance - This is insurance to cover any loss or damage to your home. Your lender will want this paid for at the closing. These policies can range from $300 to $1,000 depending on where you will live. Shop this fee to be sure you have the best price. Do this shopping before closing.

All of these loan closing costs are itemized on your Good Faith Estimate (GFE). By law this GFE is to be presented to you by the lender within three days after your application is accepted. Be sure to read this carefully and ask questions if you are uncertain what the fee is for.

Keep in mind your final GFE may the higher than the original one presented to you. This is because some of those final closing costs may be different. So do not be alarmed. Some fees were estimated to give you an idea of the cost. Then the actual bill for that fee may be more. Thus the GFE will reflect that. Still you will want to watch out for those unnecessary closing costs.

These are just some of the average closing costs you will find to close on your home mortgage. Do your homework ahead of time so that those fees that can be negotiated - are negotiated. Endeavor to not pay any more fees than you have to close on your home.

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Cut Costs With Home Refinancing

Home refinancing often makes good financial sense, but it's important to understand the basics to make sure you obtain the best rates and terms. Learn how with these home refinancing tips designed specifically for today's difficult economy:

Home Refinancing Tips

• Keep good credit. Although it is possible to get home refinancing with less than perfect credit, a good credit score is helpful to obtain the best rates. Obtain a copy of your credit score three to six months in advance to have plenty of time to review it for errors prior to actually applying for refinancing.
  
• Shop for rates. Compare the total cost of home refinancing including interest rate, closing costs and other fees to find the best deal. It's also a good idea to sign up for an email alert to be notified when rates reflect your target interest level then Lock-in a rate as soon as possible. Remember, rates can change rapidly so be prepared to act quickly. Work with a broker or online quote agency to locate the best rates for your area.
• Keep your home in good repair. In order to refinance the bank will perform a current appraisal as well as inspection and/or survey; depending upon how recently the home was purchased one or all of the above will be necessary. Make sure your home looks its best in order to appraise at a high enough value to reflect equity in the home. This is especially important for homes located in markets which have experienced dramatic drops in the market value of homes over the past 18 months. By keeping your home in good repair and performing regular maintenance it will be more likely to show a strong appraisal value.

• Compare the total cost of home refinancing. When comparison shopping for home loan rates it is important to compare the interest and additional fees including closing costs, appraisals and other related expenses. Points that you pay in order to reduce the interest rate can also add thousands to the final cost. Many seemingly low interest rates actually require the homeowner to purchase points in order to obtain that favorable interest rate. In some cases, what appears to be a higher initial rate may actually cost less in the long run if you don't need to purchase points. Take time to closely compare both the long term interest rate and APR or annual percentage rate.

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When to Refinance Your Home Mortgage

For many people, the ability to refinance your home may reduce monthly expenses and actually improve credit all at once. Contrary to what you might think, refinancing is still a viable option for many homeowners. Determine if it's a good idea to refinance your home with this quick quiz:

Should You Consider Mortgage Home Refinance?

1. Are the current mortgage interest rates at least 1 point less than your existing mortgage interest? If so, refinancing your home mortgage might make sense. If interest rates are lower now by 2 points or more than when you bought your home, you should definitely look into refinancing.
2. Do you currently have an adjustable rate mortgage, negative amortization or interest only loan that is due to reset or which isn't building equity? If so, today's historically low mortgage interest rates make it a great time to refinance a home loan and lock in low rates on a standard mortgage refinance loan with a fixed interest rate.
3. Do you have at least 20 percent or more equity in your home? If so, you might benefit from refinancing by reducing or eliminating the Private Mortgage Insurance (PMI) that you are paying each month. PMI is a type of insurance that is required in many loans where the buyer didn't make a down payment. of 20% or more. In exchange for less money down, PMI provides additional insurance to lenders in the event of a default. But if you now owe 80% or less on your mortgage, you may be able to drop the PMI and that can reduce monthly payments by $70 to $150 or more.

1. Is your debt to income ratio nearing the maximum? If you refinance your home, you may actually improve your credit score by freeing up additional income and lowering the minimum monthly payment amounts of your basic bills. By keeping a solid credit score and low debt to income ratio, you will often qualify for lower interest rates on everything from credit cards to insurance… making this a strong strategic move toward lowering all of your bills at one time.
2. Do you need to pay for a large one-time out of pocket expense like major medical bills or college tuition? If so, it is often more affordable to take out money when you refinance your home rather than securing additional loans. Just keep in mind, you could be refinancing for up to 30 years so the total cost may be substantially more in the long run. Take time to calculate the cost versus savings for yourself before making a final decision.If you answered "yes" to any of the above questions then you might benefit from speaking to a mortgage broker or lender to refinance your home. It could easily save hundreds of dollars per month. Be sure to consider the refinance closing costs and any other refinance fees in your decision. If refinance costs are nearly equal to what you would save by refinancing, then it may not be worth the trouble.

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What the Mortgage Relief Act Means For Families in California

The mortgage relief act that has been passed in the state of California is giving a lot of families that have lost their jobs and their homes due to the economic crisis, something to be happy about. Before this act was implemented, if an individual owed a debt to someone and they had this debt canceled or forgiven, the amount of debt that was canceled could be considered taxable income.

By forgiven, this means let's say that a creditor or lender decided to let you settle a past due debt for five hundred dollars less than what you owed. The amount of money that you did not pay, would be considered taxable income, thus meaning you would responsible for paying taxes on that amount of money.

The mortgage relief act was first introduced to the public in 2007. California, which has seen an immense amount of poverty since the outbreak of the economic recession has decided to extend the time frame for this act.

This means, that the act will remain in play until the year 2012. According to this act, up to two million dollars of debts around the world will be forgiven for families, one million will be forgiven if you are married filing separately.

Before this act was implemented, residents that resided in California were forced to pay taxes on any deficit account that was acquired during the processing of a foreclosure, loan modifications or a short sale. Individuals were required to report their canceled amounts on their tax forms and they had to render payment for the forgiven amounts thereafter.

The state of California is allowing anywhere between $250,000 to $500,000 to be eliminated. This means, individuals will not be responsible to file these amounts as earned income, therefore their tax amounts when filing after a home has been foreclosed on and some of the debts have been forgiven are not going to burden them in the least.

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What is involved in refinancing your home

Before you jump in head first, you should know what is involved in refinancing your home. A home refinance is just about the same as getting the original mortgage. Basically what you are doing is paying off your current loan with a new loan. The reason you do this is to get better terms, whether it be a lower interest rate or a longer term for your loan payment. You want to educate yourself so that you know everything that is involved in refinancing your home.

As I said, a refinance is just like an original mortgage, you will need to fill out an application, verify your income, go through a credit check, house appraisal and more. So why do people go through this again? It depends on the terms of your current mortgage. Most people consider refinancing if interest rates drop 2% or more below what you currently have. Also if your credit has improved, you may stand a chance to get better terms on your mortgage.

But you can't just jump into refinancing with out considering everything that is involved. Just like with an original mortgage there are closing costs. It usually doesn't make sense to refinance if your closing costs are more than the amount of money you would save through refinancing. Some lenders advertise no cost loans. But be aware that the costs are usually incorporated into the loan amount. This means that the loan will be a little higher to add in all of those fees, and this may make your monthly payment higher. Sometimes if you have the money up front it's best to pay and keep a lower principal amount or interest rate.

When you are considering refinancing, you should lay out all of your options and carefully consider which one is best for you and your financial situation. You may also need to enlist the help of other professionals such as a tax preparer or lawyer. For instance if you lower your interest rate you'll have less interest to deduct on your taxes and this may cause you a problem. Perhaps it's better for you to have high closing costs so that you can to deduct those costs during the current tax year. You should not take refinancing lightly because there are so many things involved in refinancing your home that could benefit or harm you.

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