Choosing a Mortgage Company

You will potentially be dealing with your mortgage company for the next thirty years, therefore; it is important to choose your mortgage company wisely. The best way to choose a mortgage company is to ask those around you for their experiences. Talk to friends or relatives who have recently purchased a home and ask if they were happy with the service from their mortgage company. By doing this you can begin to build a list of companies that you want to approach.

Real estate agents can also be a good source for mortgage company recommendations. Because they see people working through the financing process daily, they develop a feel for which companies are easy to deal with, and which are not as easy. Although word of mouth is an excellent way to develop a list of potential mortgage companies, it should not be your only method used. Everyone has a different financial situation, and what works for one person may not be the best choice for someone else.

Using the list of mortgage brokers that you have compiled, you can make appointments to go in and personally speak with each one. This will give you a feel for the personality and demeanor of each company. Also, if you have trouble getting your calls returned, or setting up appointments as a prospective customer, it is unlikely that your situation would improve if you had your mortgage through the company.

What to Expect from the Mortgage Company

A mortgage company is a service industry. It is important to remember this. Many people find the mortgage approval and home buying process so intimidating that they forget that they should shop for a mortgage company that they are happy with. A mortgage company should be happy to quote you specific interest rates, and let you know when you should lock in these rates. They should also tell you what the specific costs are in acquiring a loan. This means a good faith estimate on closing costs, discount and origination fees that must be paid and any other costs that may be involved when purchasing a home.

The mortgage company should be upfront about all of the technical details of the loan. They should let you know if there is any penalty for pre-payment, the amount of money required for a down payment, and what documents you will need to provide for loan approval. The mortgage company should also let you know what guidelines you must meet to qualify for a loan with them. This will include credit history, your income, employment history, your assets and liabilities and any other specifications they require.

Many states offer specialized home buying programs. The well established home mortgage company should be familiar with the various programs in your state, and provide you with information about these. If you believe that you may qualify for one of these programs, the mortgage company should help you complete any necessary paperwork and determine if you qualify.

The mortgage company should be willing to tell you how long it will take to process the loan, and if they guarantee it will be processed by a certain date. They should also provide you with any information that may slow down the loan processing process, and their method for dealing with problems.

After the Loan Closes

Once you close on your mortgage, you may never see or think of your mortgage company again. You make your monthly payment, and sometime, years down the road, you receive the title to your home. While this happens occasionally, it is not as common as you may think. You may move, and decide to sell your home. Interest rates may drop, making the decision to refinance attractive, or, you may have trouble making your monthly payment due to job loss or medical problems.

Before selling your home, you must know how much you owe on it. Your mortgage broker should be able to determine the balance of the loan and provide you with this information easily. If you decide to refinance, consider staying with the same mortgage company. Often, the mortgage company will negotiate lower closing fees or no closing costs if you refinance through the same company that currently holds your mortgage.

Finally, if catastrophe strikes and you are unable to make your mortgage payment, it is imperative that you get your mortgage company involved early in the process. They can provide you with resources for help in making or delaying payments, and let you know if foreclosure is imminent. As tempting as it is to bury your head in the sand at this time, remaining proactive can help you hand on to your home, or allow you to sell your home before foreclosure proceeding begin.

About Author:
Brain Jenkins is a freelance writer who writes about topics pertaining to the mortgage industry such as a Pennsylvania Mortgage

What is a short sale?

When the amount of a mortgage is more than the home is worth, the property may be a candidate for a short sale. A short sale is when the lender agrees to take less money for the home than the amount that is owed on the mortgage. The balance, technically, can be attached to the seller, so if you are considering a short sale it is important to work with an experienced real estate attorney.

A short sale may make sense for a seller if they must sale the home and the value of the property has dropped. A short sale may also make sense if your home is in or close to reaching default status or pre-foreclosure status. If the seller needs a way to get out from under a mortgage, due to unemployment, a divorce, a health crisis or death, a short sale is an option to consider. If the seller has assets, such as in savings or investment accounts, it will probably not be possible to negotiate a short sale with the bank.

Who benefits from a short sale?

The one person who loses the most in a short sale is the seller. While they do get out from under the stress and financial commitment of a mortgage, they will also walk away with nothing. Any equity in the home is gone. The bank, while agreeing to take less money than what is owed on the mortgage, still benefits from the short sale. Because short sales typically occur when a home is in danger of being foreclosed on, the short sale prevents the bank from entering into the foreclosure process. It also takes the home off of the bank’s hands. In a typical foreclosure, the bank has the responsibility of maintaining the property and getting it sold. With a short sale, the bank never has to take responsibility for the property. Those involved in the real estate transaction, such as agents, attorneys, appraisers and title companies, all benefit from the short sale. Although they may not receive their full fee when processing a short sale, they still make money from the process.

The biggest winner in a short sale is typically the buyer. By purchasing a home with a short sale, the buyer gets a home below market value. Because the amount that the bank will lend is based on the appraised value, when a home is purchased for less than that amount, a smaller down payment is required and PMI can be avoided. PMI, or private mortgage insurance, is a costly form of insurance that new home owners must purchase if they borrow more than 80% of the value of the home.

Disadvantages of Short Sale

Short sales can be a good decision for the home owner that cannot afford their mortgage, but they are not the answer to all financial problems. The Mortgage Forgiveness Act of 2007 states that the amount of debt forgiven by the lending institution can be considered income for the seller. Often, the lending institution will issue a 1099 to the seller, which means that they may be required to pay taxes on the forgiven amount.

Short sales also show up on the credit report. Although it would seem that a short sale is a better option than foreclosure, in the case of your credit history, they are the same. The short sale is listed as a pre-foreclosure that has been redeemed. The seller, regardless of how the rest of his credit history looks, will need to wait three years before getting a decent interest rate on a new mortgage.

Convincing the lender to agree

While lenders prefer a short sale to foreclosure, they strongly prefer that you pay off the amount of your loan when selling the home. It is up to the bank whether they will accept a short sale or not. The best way to convince the bank that a short sale is in their best interest it to prepare a package detailing the reasons you are considering accepting a short sale offer.

An estimate closing statement is the first step in convincing the lender a short sale is necessary. This statement should include the estimated sale costs, such as commissions and inspections fees, the unpaid loan amount and any late fees. If property values have dropped recently, leading to your homes value decreasing, ask your real estate agent to prepare a CMA, or comparative market analysis. The CMA shows homes in the area that are actively on the market, those whose sales are pending and homes that have been sold in the last six months. It will help strengthen your case for accepting a lower amount of money for your home. You should also include bank statements and other proof of income and debt, as well as a detailed hardship letter, which explains exactly why you feel it necessary to accept the short sale.

Short sales can be a good choice for buyers and sellers alike, but it is important to know what the drawbacks are before entering into a contract for a short sale.

About Author:
Stephanie Larkin is a freelance writer who writes about topics pertaining to the mortgage industry such as a Pennsylvania Mortgage

As more people face financial hardships due to the credit crunch, predatory mortgage companies are experiencing a business boom. Preying on the fear that people have over losing their homes, or embarrassment that others have over less than perfect credit, predatory mortgage companies sign people up for mortgages that they cannot hope to repay, or collect outrageous fees and then disappear.

A predatory mortgage company can encompass a wide variety of businesses. Some predatory mortgage companies have no plans to offer mortgages at all; they collect fees up front only to inform you that you have not been approved for the loan. Other predatory mortgage companies offer mortgages, but the terms are so onerous that the mortgage can destroy a family’s financial stability. Predatory lenders are often difficult to prosecute, because the borrower has signed a contract agreeing to the terms.

If you know what to look for, it is possible to avoid predatory mortgage companies.

• Predatory mortgage companies are aggressive. They typically initiate contact. They may use telemarketing cold calls and direct mail to contact you.
• Everything is rushed. Offers are for a limited time. Because they often target those with less than perfect credit, they know their customer may ask fewer questions and be less savvy about the loan process.
• They make recommendations that do not make sense, such as asking you to agree to a high initial interest rate, with the promise of refinancing after one year.
• They do not seem concerned about your ability to service the debt. They agree, or even encourage you to take on a loan too large. Reputable lenders typically cap loan repayment at 30% of monthly income. Anything greater than this increases the risk of defaulting on the loan.
• Loan paperwork includes conditions such as balloon payments, prepayment penalties and mandatory arbitration.
• Promise that bad credit will not affect being approved for a loan.
• Ask for large up front fees. They will have a seemingly legitimate reason for these costs, but a legitimate lender brings any payments into the closing costs.
• Read everything, if what the person says is greatly different than what is written in the contract, you should be suspicious.

How to avoid a predatory mortgage company

• Ask your friends and family members who recently purchased homes what lenders they used and what the experience was like.
• Stay local. While legitimate companies advertise on the Internet, if you are concerned about predatory lending, stay with a local bank or credit union for your mortgage needs.
• Know the total cost of the loan, the annual percentage rate, the amount of the monthly payments and the length of the loan. The lender can provide you with this information, and a responsible lender is willing to do so.
• Ask for an explanation for all fees. Often a predatory lender will have duplicate fees as a way to increase profits. Your lender should have a satisfactory definition for each expense.
• Avoid loans that include balloon payments. While a balloon mortgage lowers your monthly payment substantially, at the end of the term, the balloon payment must be made. Even if the lender “guarantees” help in refinancing the balloon, it is a bad idea. You can easily end up owing more than the property is worth, making refinancing impossible.
• Before you sign anything, contact your state’s Attorney General and ask if there are any complaints against the lender.
• Do not feel bullied. Regardless of how far into the loan process you are, you can back out. Truth in lending laws permit you to back out of a loan agreement at any time, and you should do this if any red flags are raised. If loan terms and conditions are different on the day of closing than they were during the time leading up to closing, tell the lender you need to pause and review the documents. If they try to rush you through the closing, tell them you have changed your mind and are using pursuing a different lender.
• Predatory mortgage lenders count on the fact that many of us are unfamiliar with basic lending laws and may be intimidated by the lending process. Research interest rates, closing costs and understand the basic approval process. This will help you recognize if you are being conned.

What if, despite your best efforts, you are the victim of predatory lending? After you sign a loan document, it is not final. You have three days to back out of the contract for any reason, or no reason at all. Contact the lender in writing and let them know that you want to be released from the contract. If it has been longer than three days, contact your state’s Attorney General. This office is in charge of consumer protection, and they can help you pursue actions against the lending company.

About Author:
Stephanie Larkin is a freelance writer who writes about topics pertaining to the mortgage industry such as a Pennsylvania Mortgage