Self-employed 5 steps to register a mortgage

 Self-employed 5 steps to register a mortgage

If there is anything we learned from the collapse of the 2008 subsystem and the 1987 crash, we must all be careful when borrowing money to buy or refinance the home. The type of mortgage you choose can mean the difference between one day owning your home directly or finding yourself in the middle of a foreclosure or even bankruptcy. In this article, we will discuss the types of mortgages that people often have a problem with and explain why they are a bad idea when they match the wrong borrower.




Educational: Real Estate Investment

 What makes a mortgage risky? Because of the housing crisis, many of us have come to believe that certain types of mortgages are risky. However, mortgage experts will tell you that a risky mortgage is really a loan product that does not match the repayment ability of the borrower. (Take a look at the factors that have caused this market to explode and burn, check out the fuel that Federal Reserve collapse is a premium.


If you are looking for mortgage loanse

"Believe it or not, the products available [throughout 2009] were not particularly risky, for the right audience," agrees Keith T. Gumpinger, vice president of Hac Associates. The problem is that some types of mortgage were matched with wrong borrowers, and lenders were telling borrowers: "You can always refinance." This may sound true when house prices have been rising for years, but not true when house values ​​fall.




Housing market statistics shortly after the 2008-2009 crisis supports these assertions. According to the survey of national bank delinquency in the mortgage bank, in the second quarter of 2010, the types of loans with the highest proportion of foreclosure starts were adjustable rate mortgages (ARM), which had a mortgage rate of 3. 39%. With variable interest rates, ARMS is a highly risk-prone product for borrowers with less than ideal financial conditions.

In comparison, the survey reported that loans obtained by the Agency reached 70%, and major fixed loans 71.71%, FHA loans 1. 02%, major balances 1.96% and fixed loans. 3%. These data suggest that any type of mortgage can be a bad idea for a superior borrower, and even that the major borrowers can get in trouble if they do not understand the symbols.

In fact, even fixed-rate mortgages can hurt borrowers. Let's look at the first risky mortgage type.

1. Fixed rate mortgages for 40 years Borrowers with fixed rate mortgages may have a low rate of foreclosure, but this does not mean that fixed rate mortgages are always a good idea. A fixed term mortgage for 40 years is one of this product because the more you borrow money for, the more interest you pay.

Let's say you want to buy $ 200,000 with a 10% down payment. The amount you will need to borrow is $ 180,000 ($ 200,000,000 minus $ 20,000).

At a 5% interest rate, here are the monthly payments and the total amount you will pay for the home on different terms if you keep the loan for life:

Duration of interest rate> Monthly payment Monthly cost (including first installment) Principal amount (including first installment) Total interest paid 15 years
5. 0% $ 1, 423. 43 $ 276, 217. 14 $ 200, 000 $ 76, 217. 14 20 years
5. 0% $ 1, 187. 92 $ 305, 100. 88 $ 200, 000 $ 105, 100. 88 30 years
5. 0% $ 966. 28 $ 367, 860. $ 41 200, $ 167, $ 860. 41 40 years
5. Figure 1: Interest and principal paid on foreclosure on various terms (years).
The above chart is a simplified comparison. In fact, the interest rate will be lower for the loan for 15 years and higher for the loan for 40 years.

Duration

 Monthly interest rate Monthly cost (including first installment) Director (including first installment)> 15 years 4. 5%
$ 1, 376. 99 $ 267, 858. 83 $ 200, 000 $ 67, 858. 83 20 years 5. 0%
$ 1, 187. 92 $ 305, 100. 88 $ 200, 000 $ 105, 100. 88 30 years 5. 2%
$ 988. 40 $ 375, 823. 85 $ 200, 000 $ 175, 823. 85 40 years 5. 8%
Figure 2: Interest and principal paid on foreclosure on various terms (years) and interest rates. As you can see in Figure 2 above, the 40-year mortgage is 0. 6% higher in interest, and your monthly bill will only cut $ 23, from $ 988 to $ 965. However, it will cost you an extra $ 107, 570. 82 over the life of the loan. Most people can not throw away that kind of money. Taking a 40-year mortgage increases the risk of not having enough to retire, being unable to pay for your children's education, or any number of other scenarios. At best, I would give up $ 107, 570. 82 that you could spend on holidays, electronics, a nice dinner and other fun expenses. Who wants to do that?
2. Adjustable rate mortgages

Adjustable rate mortgages (ARMs) have a fixed interest rate for a short initial period that can range from six months to 10 years. This initial interest rate, called the thrill rate, is often lower than the fixed-rate interest rate for 15 or 30 years. After the initial period, the rate is adjusted periodically - which may be once a year, once every six months or even once a month.

The symbols become more serious if you have a jumbo mortgage, simply because your top manager, the more change in the interest rate will affect your monthly payment.

That being said, Mary Totekian, an experienced mortgage processor and underwriter and author of "Surprised in America", points out that "Historically, people do not stay in their homes or mortgages for more than 5-7 years, therefore, why pay a higher rate Of the 30-year loan when the mortgage is less useful? "

It is also important to note that adjustable interest rate can adjust the decline, reduce your monthly payment. This means that the symbol can be a good option if you expect future interest rates to fall. Of course, you can not predict the future. For more details, read

 Mortgages: fixed rate vs. adjustable rate

. 3. Interest Only Mortgages With a mortgage interest only (u), the borrower only pays interest on the first term mortgage for five to 10 years, allowing a lower monthly mortgage payment during this time. This makes interest mortgages just attractive to some real estate investors who will own a home for a short period of time and want to reduce their book costs.

E mortgages can also be good for people who receive irregular income and people who have great potential to increase future income, but only if they are disciplined enough to make higher payments when they can do so. The downside is that the mortgage rate tends to be higher than the rate you would pay on a traditional fixed rate mortgage because people often default on interest loans only. (These loans can be beneficial, but for many borrowers, what they offer is a financial trap to learn more at

 Mortgages Interest Only:. Free or displaced home

) Moreover, if you are not financially sophisticated borrower, interest-only mortgages can be very risky for any one or more of the following reasons: You can not afford much higher monthly payments at the end of the interest period only. At this point, you will still pay interest, but you'll also have to pay off originally over a shorter period than you would with a fixed rate loan.

You can not refinance because you have little home equity without.
• Can not sell because you have a little lack of home equity and house prices have fallen, putting you under water.
• Borrowers who keep a loan interest only on the life of the loan will pay much more interest than they had with a traditional mortgage.
• Depending on how the loan is structured, you may experience a large balloon payment out of debt at the end of the loan term.
• If you are a borrower who is not a good candidate for a loan, any of these problems can cause you to lose your home in the worst case scenario. In a slightly worse scenario, a loan can simply cost you much more than you really need to pay to be a homeowner.
• 4. Interest only symbol

 With some interest only loans, called interest only symbol, the interest rate is not fixed, but can go up or down based on market interest rates. Essentially, the ARM interest only takes two types of potential mortgage risks and combines them into a single product.

Here's an example of how this product works. The borrower pays interest only, at a fixed rate, for the first five years. Then, over the next five years, the borrower continues to pay interest only, but the interest rate is set annually based on market interest rates, which means that the borrower's interest rate can rise or fall. Then, for the remainder of the term of the loan, for example, 20 years, the borrower will pay a fixed amount out of every month in addition to the interest each month at an annual rate of interest. Many people simply do not have a financial or emotional means to endure the uncertainty that comes with interest only symbols. (For more details

 Payment Option Code: A Ticking Time Bomb?

) 5. Low-paying loans seems to be a low risk is to put only 3% because you do not spend a lot of money. In fact, FHA loans and Federal Housing Management Loan (FAA), which have payment requirements of 0% and 3. 5% respectively, have some of the lowest foreclosure mortgage rates. The problem with making a low payment is that if house prices fall, you can stumble in a situation where you can not sell or refinance.

If you have enough money in the bank, you can buy yourself out of your mortgage, but most people who make a payment on their homes do not have large cash reserves. The bottom line

 While most loans that some mortgage lenders may consider really high-risk, such as interest-only mortgages, are no longer on the market, there are still a lot of ways to end up with a bad mortgage if you sign up for a product that is really not true For you. (See also

 Self-employed 5 steps to register a mortgage