Mortgage Loan

Are Bad Credit Mortgage loans possible?

admin — Wed, 21 Mar 2012 10:53:05 +0000

Bad credit is one problem that has been gnawing at the heels of most present day earning individuals. With the global recession having cast its shadow to a pretty great extent, a number of individuals have been finding it extremely difficult to manage all their payments and loans without much hassle. However, one question that arises most is whether a bad credit score wipes out the chances of ever getting a mortgage loan sanctioned. Well, the good news is that, the present markets have made lending institutions lower down their credit rating demand and even accept mortgage loan applications that come from those with poor credit scores. Though this is great news, you need to acquaint yourself with few things that shall make these loans possible.

Factors that play a vital role

Steady incomes - The first factor you need to satisfy is the availability of a permanent steady job. It is very essential for lenders to know that the borrower has the resource to pay the installments of the mortgage taken. Instead of having fluctuating levels of income, it would be better to aim for a steady monthly flow. This creates the right impression on the lenders and hardly brings into focus a low credit score.
Miscellaneous - Of course, other than this vital factor, a poor credit score mortgage applicant needs to fulfill the regular conditions like citizenship, identity proofs, age and the conventional factors that are required.
Down Payment decisions - Despite having a poor credit score, borrowers have a decent enough chance of gaining a mortgage loan sanction if he pays a higher down payment as compared to the conventional zero percent of the total loan value. Discuss the details with your loan advisor who would offer you a solution tailor made for your situation and credit score. Each lender has specific down payment polices.

By now it must be clear that a mortgage loan sanction with poor credit score is no longer impossible. Of course, you need to work upon improving the credit score too. It does not really matter whether your score has hit an all time low. Paying bills on time, maintaining credit card installments in a timely fashion are few of the steps that can help you improve your low score. In fact, timely mortgage loan payments too will reflect on your credit report and shall miraculously push up the score.

Mortgage Loans :What is “Mortgage Loan”?

admin — Wed, 28 Dec 2011 11:57:56 +0000

A mortgage loan is a loan secured by real property through the use of a note which evidences the existence of the loan and the encumbrance of that realty through the granting of a mortgage which secures the loan. However, the word mortgage alone, in everyday usage, is most often used

=============
Article Content:
A mortgage loan is a loan secured by real property through the use of a note which evidences the existence of the loan and the encumbrance of that realty through the granting of a mortgage which secures the loan. However, the word mortgage alone, in everyday usage, is most often used to mean mortgage loan.
A home buyer or builder can obtain financing (a loan) either to purchase or secure against the property from a financial institution, such as a bank, either directly or indirectly through intermediaries. Features of mortgage loans such as the size of the loan, maturity of the loan, interest rate, method of paying off the loan, and other characteristics can vary considerably.

———————

Mortgage Loan :Mortgage Loan Basic

admin — Wed, 28 Dec 2011 11:57:56 +0000

Basic concepts and legal regulation According to Anglo-American property law, a mortgage occurs when an owner (usually of a fee simple interest in realty) pledges his interest as security or collateral for a loan. Therefore, a mortgage is an encumbrance on property just as an easement

=============
Article Content:
Basic concepts and legal regulation According to Anglo-American property law, a mortgage occurs when an owner (usually of a fee simple interest in realty) pledges his interest as security or collateral for a loan. Therefore, a mortgage is an encumbrance on property just as an easement would be, but because most mortgages occur as a condition for new loan money, the word mortgage has become the generic term for a loan secured by such real property.[clarification needed]
As with other types of loans, mortgages have an interest rate and are scheduled to amortize over a set period of time; typically 30 years. All types of real property can, and usually are, secured with a mortgage and bear an interest rate that is supposed to reflect the lender’s risk.
Mortgage lending is the primary mechanism used in many countries to finance private ownership of residential property. For commercial mortgages see the separate article. Although the terminology and precise forms will differ from country to country, the basic components tend to be similar:

Loan to value and downpayments Upon making a mortgage loan for purchase of a property, lenders usually require that the borrower make a downpayment, that is, contribute a portion of the cost of the property. This downpayment may be expressed as a portion of the value of the property (see below for a definition of this term). The loan to value ratio (or LTV) is the size of the loan against the value of the property. Therefore, a mortgage loan where the purchaser has made a downpayment of 20% has a loan to value ratio of 80%. For loans made against properties that the borrower already owns, the loan to value ratio will be imputed against the estimated value of the property.
The loan to value ratio is considered an important indicator of the riskiness of a mortgage loan: the higher the LTV, the higher the risk that the value of the property (in case of foreclosure) will be insufficient to cover the remaining principal of the loan.

Value: appraised, estimated, and actual Since the value of the property is an important factor in understanding the risk of the loan, determining the value is a key factor in mortgage lending. The value may be determined in various ways, but the most common are:
Actual or transaction value: this is usually taken to be the purchase price of the property. If the property is not being purchased at the time of borrowing, this information may not be available.Appraised or surveyed value: in most jurisdictions, some form of appraisal of the value by a licensed professional is common. There is often a requirement for the lender to obtain an official appraisal.Estimated value: lenders or other parties may use their own internal estimates, particularly in jurisdictions where no official appraisal procedure exists, but also in some other circumstances.
Equity or homeowner’s equity The concept of equity in a property refers to the value of the property minus the outstanding debt, subject to the definition of the value of the property. Therefore, a borrower who owns a property whose estimated value is 0,000 but with outstanding mortgage loans of 0,000 is said to have homeowner’s equity of 0,000.

Payment and debt ratios In most countries, a number of more or less standard measures of creditworthiness may be used. Common measures include payment to income (mortgage payments as a percentage of gross or net income); debt to income (all debt payments, including mortgage payments, as a percentage of income); and various net worth measures. In many countries, credit scores are used in lieu of or to supplement these measures. There will also be requirements for documentation of the creditworthiness, such as income tax returns, pay stubs, etc; the specifics will vary from location to location. Many countries have lower requirements for certain borrowers, or “no-doc” / “low-doc” lending standards that may be acceptable in certain circumstances.

Standard or conforming mortgages Many countries have a notion of standard or conforming mortgages that define a perceived acceptable level of risk, which may be formal or informal, and may be reinforced by laws, government intervention, or market practice. For example, a standard mortgage may be considered to be one with no more than 70-80% LTV and no more than one-third of gross income going to mortgage debt.
A standard or conforming mortgage is a key concept as it often defines whether or not the mortgage can be easily sold or securitized, or, if non-standard, may affect the price at which it may be sold. In the United States, a conforming mortgage is one which meets the established rules and procedures of the two major government-sponsored entities in the housing finance market (including some legal requirements). In contrast, lenders who decide to make nonconforming loans are exercising a higher risk tolerance and do so knowing that they face more challenge in reselling the loan. Many countries have similar concepts or agencies that define what are “standard” mortgages. Regulated lenders (such as banks) may be subject to limits or higher risk weightings for non-standard mortgages. For example, banks in Canada face restrictions on lending more than 75% of the property value; beyond this level, mortgage insurance is generally required (as of April 2007, there is a proposal to raise this limit to 80%).

———————

Mortgages Loans :Repaying the capital

admin — Wed, 28 Dec 2011 11:57:56 +0000

There are various ways to repay a mortgage loan; repayment depends on locality, tax laws and prevailing culture. Capital and interest The most common way to repay a loan is to make regular payments of the capital (also called principal) and interest over a set term. This is commonly

=============
Article Content:
There are various ways to repay a mortgage loan; repayment depends on locality, tax laws and prevailing culture.

Capital and interest The most common way to repay a loan is to make regular payments of the capital (also called principal) and interest over a set term. This is commonly referred to as (self) amortization in the U.S. and as a repayment mortgage in the UK. A mortgage is a form of annuity (from the perspective of the lender), and the calculation of the periodic payments is based on the time value of money formulas. Certain details may be specific to different locations: interest may be calculated on the basis of a 360-day year, for example; interest may be compounded daily, yearly, or semi-annually; prepayment penalties may apply; and other factors. There may be legal restrictions on certain matters, and consumer protection laws may specify or prohibit certain practices.
Depending on the size of the loan and the prevailing practice in the country the term may be short (10 years) or long (50 years plus). In the UK and U.S., 25 to 30 years is the usual maximum term (although shorter periods, such as 15-year mortgage loans, are common). Mortgage payments, which are typically made monthly, contain a capital (repayment of the principal) and an interest element. The amount of capital included in each payment varies throughout the term of the mortgage. In the early years the repayments are largely interest and a small part capital. Towards the end of the mortgage the payments are mostly capital and a smaller portion interest. In this way the payment amount determined at outset is calculated to ensure the loan is repaid at a specified date in the future. This gives borrowers assurance that by maintaining repayment the loan will be cleared at a specified date, if the interest rate does not change.

Interest only The main alternative to capital and interest mortgage is an interest only mortgage, where the capital is not repaid throughout the term. This type of mortgage is common in the UK, especially when associated with a regular investment plan. With this arrangement regular contributions are made to a separate investment plan designed to build up a lump sum to repay the mortgage at maturity. This type of arrangement is called an investment-backed mortgage or is often related to the type of plan used: endowment mortgage if an endowment policy is used, similarly a Personal Equity Plan (PEP) mortgage, Individual Savings Account (ISA) mortgage or pension mortgage. Historically, investment-backed mortgages offered various tax advantages over repayment mortgages, although this is no longer the case in the UK. Investment-backed mortgages are seen as higher risk as they are dependent on the investment making sufficient return to clear the debt.
Until recently it was not uncommon for interest only mortgages to be arranged without a repayment vehicle, with the borrower gambling that the property market will rise sufficiently for the loan to be repaid by trading down at retirement (or when rent on the property and inflation combine to surpass the interest rate).

No capital or interest For older borrowers (typically in retirement), it may be possible to arrange a mortgage where neither the capital nor interest is repaid. The interest is rolled up with the capital, increasing the debt each year.
These arrangements are variously called reverse mortgages, lifetime mortgages or equity release mortgages, depending on the country. The loans are typically not repaid until the borrowers die, hence the age restriction. For further details, see equity release.

Interest and partial capital In the U.S. a partial amortization or balloon loan is one where the amount of monthly payments due are calculated (amortized) over a certain term, but the outstanding capital balance is due at some point short of that term. In the UK, a part repayment mortgage is quite common, especially where the original mortgage was investment-backed and on moving house further borrowing is arranged on a capital and interest (repayment) basis.

Foreclosure and non-recourse lending In most jurisdictions, a lender may foreclose the mortgaged property if certain conditions – principally, non-payment of the mortgage loan – obtain. Subject to local legal requirements, the property may then be sold. Any amounts received from the sale (net of costs) are applied to the original debt. In some jurisdictions, mortgage loans are non-recourse loans: if the funds recouped from sale of the mortgaged property are insufficient to cover the outstanding debt, the lender may not have recourse to the borrower after foreclosure. In other jurisdictions, the borrower remains responsible for any remaining debt. In virtually all jurisdictions, specific procedures for foreclosure and sale of the mortgaged property apply, and may be tightly regulated by the relevant government; in some jurisdictions, foreclosure and sale can occur quite rapidly, while in others, foreclosure may take many months or even years. In many countries, the ability of lenders to foreclose is extremely limited, and mortgage market development has been notably slower.

———————

Mortgage Loan :Mortgage lending: United States

admin — Wed, 28 Dec 2011 11:57:56 +0000

United States mortgage process In the U.S., the process by which a mortgage is secured by a borrower is called origination. This involves the borrower submitting an application and documentation related to his/her financial history and/or credit history to the underwriter. Many banks

=============
Article Content:
United States mortgage process In the U.S., the process by which a mortgage is secured by a borrower is called origination. This involves the borrower submitting an application and documentation related to his/her financial history and/or credit history to the underwriter. Many banks now offer “no-doc” or “low-doc” loans in which the borrower is required to submit only minimal financial information. These loans carry a higher interest rate and are available only to borrowers with excellent credit. Sometimes, a third party is involved, such as a mortgage broker. This entity takes the borrower’s information and reviews a number of lenders, selecting the ones that will best meet the needs of the consumer.
Loans are often sold on the open market to larger investors by the originating mortgage company. Many of the guidelines that they follow are suited to satisfy investors. Some companies, called correspondent lenders, sell all or most of their closed loans to these investors, accepting some risks for issuing them. They often offer niche loans at higher prices that the investor does not wish to originate.
If the underwriter is not satisfied with the documentation provided by the borrower, additional documentation and conditions may be imposed, called stipulations. The meeting of such conditions can be a daunting experience for the consumer, but it is crucial for the lending institution to ensure the information being submitted is accurate and meets specific guidelines. This is done to give the lender a reasonable guarantee that the borrower can and will repay the loan. If a third party is involved in the loan, it will help the borrower to clear such conditions.
The following documents are typically required for traditional underwriter review. Over the past several years, use of “automated underwriting” statistical models has reduced the amount of documentation required from many borrowers. Such automated underwriting engines include Freddie Mac’s “Loan Prospector” and Fannie Mae’s “Desktop Underwriter”. For borrowers who have excellent credit and very acceptable debt positions, there may be virtually no documentation of income or assets required at all. Many of these documents are also not required for no-doc and low-doc loans.

———————

Best Mortgage Loan :Mortgages in the UK

admin — Wed, 28 Dec 2011 11:57:56 +0000

The mortgage loans industry and market There are currently over 200 significant separate financial organizations supplying mortgage loans to house buyers in Britain. The major lenders include building societies, banks, specialized mortgage corporations, insurance companies, and pension

=============
Article Content:
The mortgage loans industry and market There are currently over 200 significant separate financial organizations supplying mortgage loans to house buyers in Britain. The major lenders include building societies, banks, specialized mortgage corporations, insurance companies, and pension funds. Over the years, the share of the new mortgage loans market held by building societies has declined. Between 1977 and 1987, it fell drastically from 96% to 66% while that of banks and other institutions rose from 3% to 36%. The banks and other institutions that made major inroads into the mortgage market during this period were helped by such factors as:
To make matters more confusing these rates are often combined: For example, 4.5% 2 year fixed then a 3 year tracker at BoE rate plus 0.89%.
With each incentive the lender may be offering a rate at less than the market cost of the borrowing. Therefore, they typically impose a penalty if the borrower repays the loan within the incentive period or a longer period (referred to as an extended tie-in). These penalties used to be called a redemption penalty or tie-in, however since the onset of Financial Services Authority regulation they are referred to as an early repayment charge.

“Self Cert” mortgage Mortgage lenders usually use salaries declared on wage slips to work out a borrower’s annual income and will usually lend up to a fixed multiple of the borrower’s annual income. Self Certification Mortgages, informally known as “self cert” mortgages, are available to employed and self employed people who have a deposit to buy a house but lack the sufficient documentation to prove their income.
This type of mortgage can be beneficial to people whose income comes from multiple sources, whose salary consists largely or exclusively of commissions or bonuses, or whose accounts may not show a true reflection of their earnings. Self cert mortgages have two disadvantages: the interest rates charged are usually higher than for normal mortgages and the loan to value ratio is usually lower.

100% mortgages Normally when a bank lends a customer money they want to protect their money as much as possible; they do this by asking the borrower to fund a certain percentage of the property purchase in the form of a deposit.
100% mortgages are mortgages that require no deposit (100% loan to value). These are sometimes offered to first time buyers, but almost always carry a higher interest rate on the loan.
Together/Plus mortgages
A development of the theme of 100% mortgages is represented by Together/Plus type mortgages, which have been launched by a number of lenders in recent years.
Together/Plus Mortgages represent loans of 100% or more of the property value – typically up to a maximum of 125%. Such loans are normally (but not universally) structured as a package of a 95% mortgage and an unsecured loan of up to 30% of the property value. This structure is mandated by lenders’ capital requirements which require additional capital for loans of 100% or more of the property value.

UK mortgage process UK lenders usually charge a valuation fee, which pays for a chartered surveyor to visit the property and ensure it is worth enough to cover the mortgage amount. This is not a full survey so it may not identify all the defects that a house buyer needs to know about. Also, it does not usually form a contract between the surveyor and the buyer, so the buyer has no right to sue if the survey fails to detect a major problem. For an extra fee, the surveyor can usually carry out a building survey or a (cheaper) “homebuyers survey” at the same time.

———————

Best Mortgage Loan :Mortgage lending in Continental Europe

admin — Wed, 28 Dec 2011 11:57:56 +0000

Within the European Union, the Covered bonds market volume (covered bonds outstanding) amounted to about EUR 2 billion at year-end 2007 with Germany, Denmark, Spain, and France each having outstandings above 200.000 EUR million. In German language, Pfandbriefe is the term applied.

=============
Article Content:
Within the European Union, the Covered bonds market volume (covered bonds outstanding) amounted to about EUR 2 billion at year-end 2007 with Germany, Denmark, Spain, and France each having outstandings above 200.000 EUR million. In German language, Pfandbriefe is the term applied. Pfandbrief-like securities have been introduced in more than 25 European countries – and in recent years also in the U.S. and other countries outside Europe – each with their own unique law and regulations. However, the diffusion of the concept differ: In 2000, the US institutions Fannie Mae and Freddie Mac together reached one per cent of the national population. Furthermore, 87 per cent of their purchased mortgages were granted to borrowers in metropolitan areas with higher income levels. In Europe, a wider market has been achieved: In Denmark, mortgage banks reached 35 per cent of the population in 2002, while the German Bausparkassen achieved widespread regional distribution and more than 30 per cent of the German population concluded a Bauspar contract (as of 2001).

Costs A study issued by the UN Economic Commission for Europe compared German, US, and Danish mortgage systems. The German Bausparkassen have reported nominal interest rates of approximately 6 per cent per annum in the last 40 years (as of 2004). In addition, they charge administration and service fees (about 1.5 per cent of the loan amount). In the United States, the average interest rates for fixed-rate mortgages in the housing market started in high double figures in the 1980s and have (as of 2004) reached about 6 per cent per annum. However, gross borrowing costs are substantially higher than the nominal interest rate and amounted for the last 30 years to 10.46 per cent. In Denmark, similar to the United States capital market, interest rates have fallen to 6 per cent per annum. A risk and administration fee amounts to 0.5 per cent of the outstanding debt. In addition, an acquisition fee is charged which amounts to one per cent of the principal.

Recent trends July 28, 2008, US Treasury Secretary Henry Paulson announced that, along with four large US banks, the Treasury would attempt to kick-start a market for these securities in the U.S., primarily to provide an alternative form of mortgage-backed securities. Similarly, in the UK “the Government is inviting views on options for a UK framework to deliver more affordable long-term fixed-rate mortgages, including the lessons to be learned from international markets and institutions”. More specifically, Mr. George Soros issued a Wall Street Journal Opinion: Denmark Offers a Model Mortgage Market. – A survey of European Pfandbrief-like products was issued in 2005 by the Bank for International Settlements[13]; the International Monetary Fund in 2007 issued a study of the covered bond markets in Germany and Spain, while the European Central Bank in 2003 issued a study of housing markets, addressing also mortgage markets and providing a two page overview of current mortgage systems in the EU countries.

History While the idea originated in Prussia in 1769, a Danish act on mortgage credit associations of 1850 enabled the issuing of bonds (Danish: Realkreditobligationer) as a means to refinance mortgage loans . With the German mortgage banks law of 1900, the whole German Empire was given a standardized legal foundation for the emission of Pfandbriefe. An account from the perspective of development economics is available.

———————

Mortgages Loans :Mortgage insurance

admin — Wed, 28 Dec 2011 11:57:56 +0000

Mortgage insurance is an insurance policy designed to protect the mortgagee (lender) from any default by the mortgagor (borrower). It is used commonly in loans with a loan-to-value ratio over 80%, and employed in the event of foreclosure and repossession. This policy is typically

=============
Article Content:
Mortgage insurance is an insurance policy designed to protect the mortgagee (lender) from any default by the mortgagor (borrower). It is used commonly in loans with a loan-to-value ratio over 80%, and employed in the event of foreclosure and repossession.
This policy is typically paid for by the borrower as a component to final nominal (note) rate, or in one lump sum up front, or as a separate and itemized component of monthly mortgage payment. In the last case, mortgage insurance can be dropped when the lender informs the borrower, or its subsequent assigns, that the property has appreciated, the loan has been paid down, or any combination of both to relegate the loan-to-value under 80%.
In the event of repossession, banks, investors, etc. must resort to selling the property to recoup their original investment (the money lent), and are able to dispose of hard assets (such as real estate) more quickly by reductions in price. Therefore, the mortgage insurance acts as a hedge should the repossessing authority recover less than full and fair market value for any hard asset.

———————

Mortgage Loans :Islamic mortgages

admin — Wed, 28 Dec 2011 11:57:56 +0000

The Sharia law of Islam prohibits the payment or receipt of interest, which means that practising Muslims cannot use conventional mortgages. However, real estate is far too expensive for most people to buy outright using cash: Islamic mortgages solve this problem by having the property

=============
Article Content:
The Sharia law of Islam prohibits the payment or receipt of interest, which means that practising Muslims cannot use conventional mortgages. However, real estate is far too expensive for most people to buy outright using cash: Islamic mortgages solve this problem by having the property change hands twice. In one variation, the bank will buy the house outright and then act as a landlord. The homebuyer, in addition to paying rent, will pay a contribution towards the purchase of the property. When the last payment is made, the property changes hands.
Typically, this may lead to a higher final price for the buyers. This is because in some countries (such as the United Kingdom and India) there is a Stamp Duty which is a tax charged by the government on a change of ownership. Because ownership changes twice in an Islamic mortgage, a stamp tax may be charged twice. Many other jurisdictions have similar transaction taxes on change of ownership which may be levied. In the United Kingdom, the dual application of Stamp Duty in such transactions was removed in the Finance Act 2003 in order to facilitate Islamic mortgages.
An alternative scheme involves the bank reselling the property according to an installment plan, at a price higher than the original price.
Both of these methods compensate the lender as if they were charging interest, but the loans are structured in a way that in name they are not, and the lender shares the financial risks involved in the transaction with the homebuyer.

———————

Mortgage Loans :Other terminologies

admin — Wed, 28 Dec 2011 11:57:56 +0000

Like any other legal system, the mortgage business sometimes uses confusing jargon. Below are some terms explained in brief. If a term is not explained here it may be related to the legal mortgage rather than to the loan. Advance This is the money you have borrowed plus all the additional

=============
Article Content:
Like any other legal system, the mortgage business sometimes uses confusing jargon. Below are some terms explained in brief. If a term is not explained here it may be related to the legal mortgage rather than to the loan.
Advance This is the money you have borrowed plus all the additional fees.
Base rate In UK, this is the base interest rate set by the Bank of England. In the United States, this value is set by the Federal Reserve and is known as the Discount Rate.
Bridging loan This is a temporary loan that enables the borrower to purchase a new property before the borrower is able to sell another current property.
Disbursements These are all the fees of the solicitors and governments, such as stamp duty, land registry, search fees, etc.
Early redemption charge / Pre-payment penalty / Redemption penalty This is the amount of money due if the mortgage is paid in full before the time finished.
equity This is the market value of the property minus all loans outstanding on it.
First time buyer This is the term given to a person buying property for the first time.
Loan origination fee A charge levied by a creditor for underwriting a loan. The fee often is expressed in points. A point is 1 percent of the loan amount.
Sealing fee This is a fee made when the lender releases the legal charge over the property.
Subject to contract This is an agreement between seller and buyer before the actual contract is made.

———————