Melody's Blog

Topic and Information Source

Melody Aguilera (WealthBridge Mortgage) — Tue, 07 Nov 2006 17:57:42 -0600

Information posted on my blog comes from www.mortgageguide101.com

Mortgage Insurance

Melody Aguilera (WealthBridge Mortgage) — Sun, 05 Nov 2006 12:53:29 -0600

There are a variety of mortgage insurance products on the market. Some of these products claim to help you to save for a home. Some of these products are geared to make your payments in the case of disability, ill health or death.

In most cases, if your lender offers you mortgage insurance, it will be a type of mortgage life insurance. This insurance will ensure that your mortgage is paid off in the case of the death of you or your spouse (as long as you are both named on the mortgage itself.)

In general, you will get a better deal on this kind of insurance if you buy it from an insurance company directly. The insurance packages that are offered to you by your lender are normally a more expensive insurance with lesser benefits. So, although your lender may try to talk you into life insurance for your mortgage, you are better off to say no.

Frankly, the kind of mortgage life insurance offered by your lender can be more than 3 times as expensive as buying a term life insurance policy for the same amount and the net effect is the same: You will have the money to pay off your home in the case of a death. However, if you have to buy additional insurance for both of you in order to fully ensure your home in case of death, you should compare the costs of two life insurance policies against the cost of the single insurance through your lender.

What if you have a bad credit history and your lender insists on insurance as a condition of your loan? Then, you may have to take the insurance. However, this insurance is likely to be different than mortgage life insurance. In all likelihood, this will be private mortgage insurance, and you'll usually be required to get it if you don't have a full 25% down for your home. Now while this kind of insurance may allow you to buy your home, it is an additional cost and it will not benefit you.

You are taking out insurance that will benefit your lender, in case you default on the mortgage. This provides your lender with greater security, and may allow you to get a mortgage that you wouldn't otherwise be able to get. However, as soon as you can, renegotiate to get rid of this insurance. It is pure overhead for you.

Mortgage Quotes

Melody Aguilera (WealthBridge Mortgage) — Sun, 05 Nov 2006 12:51:06 -0600

A mortgage quote is pretty much exactly what you would expect. It's a quote from a lender for your mortgage, which provides you with an interest rate and term for the mortgage.

You can get a quote on any type of mortgage, from a fixed rate mortgage to an adjustable rate mortgage to a variable rate mortgage. You can get a quote on various terms, from 6 months to 10 years. It's up to you. Most lenders, however, will want to steer you in the direction of the type of mortgage that will make the most money for them. So it's up to you to decide which mortgage will work best for you, in advance.

How do you decide what kind of mortgage you would like to get quotes for? Here are a few simple guidelines:

If interest rates are going down, consider a shorter-term mortgage. Go for one year or less (if your credit rating and life circumstance will allow). Read up on financial sites and see whether rates are expected to go down, stay the same, or go up; during what time frame. Based on this information you can decide whether to lock in, for what time period and whether a variable mortgage or adjustable rate mortgage are better deals.
If interest rates are going up consider a longer-term mortgage. However, it's not usually in your best interests to lock in for more than 5 years. If you do, you'll likely end up paying a much higher interest rate on average than if you took a shorter mortgage or a variable mortgage. You may also out on being able to lower your rate. Again, keep your own credit rating and life circumstances in mind.
If you are good at saving money get the best prepayment and payment frequency options you can. Sacrifice as much as ¼ percent interest to get these (particularly if you are good at saving or expect to have a 'windfall' in the near future), but never sacrifice more than that. Keep in mind that most of us may have the best of intentions regarding extra payments, but we may not actually make them. You still need to get the best interest rate you can.

One of your best tools in getting quotes is through your local broker (Melody Milak). Many sites offer free mortgage quotes without knowing your individual situation. Speak to a live person that wants your business.

When is it Smart to Refinance?

Melody Aguilera (WealthBridge Mortgage) — Sun, 05 Nov 2006 12:47:15 -0600

The right time to refinance is when it will save you money. It's as simple as that.

However, it normally saves you money in the long run. In the short run, it's likely going to cost you money. Your costs could be penalties for refinancing, including points, fees, a new property appraisal (if required), and potentially title insurance. If you move from one lender to another, you can definitely expect to need an appraisal and title insurance. If you can refinance with your current lender, you may be able to avoid some costs, but this will depend on your lender and what that lender is willing to waive.

So, when will you most likely save money? There are three basic scenarios that generally work in your favour:

Interest rates are dropping, and you are locked in at a rate more than 1.5 % higher than the current rate.
You can reduce your overall monthly payments enough to offset any costs of refinancing penalties.
You have credit card debt that is not getting paid off, your payments are too high, and you are finding yourself in financial difficulty. (This is an extended circumstance of point #2.)

Let's look at the first scenario. You're locked into an interest rate that is too high. How can you be sure you'll save over the long run if you refinance? You'll have to look at the type of mortgage you have. If you have an ARM (most folks do) then you'll want to compare the lifetime caps of your mortgage versus today's ARMs to determine if your rate is high enough to justify refinancing. Also, the likelihood of saving money increases if you plan to hold onto your property for at least 5 years. If you are planning on moving in the next year or so, refinancing may not be the best option.

What's at issue is how long it will take to recoup the costs of refinancing and start to see a dollar benefit back to you. Let's say you've added up all the costs, and you've got a number of $3000. However, refinancing actually saves you $150 a month. It looks as if you'll have made back the costs in 20 months and your saving will then be yours. But, you have to be careful when calculating your benefits. There are catches.

The biggest is that you'll lose tax benefits by refinancing. Interest paid on your mortgage is tax deductible. If you are paying less on your mortgage, you'll also be claiming less on your taxes. As a result, depending on your tax bracket, some of your savings will be "clawed back" in tax. In fact, if your federal tax rate is 28 %, and you use the scenario we've used here, your real savings will be $108 a month (once your income tax changes are factored in). So, it will actually take you 28 months to get your costs back.

So, keep in mind the changes to your taxes when you are thinking about refinancing, and this will give you a true picture of the benefits to you.

It's the same calculation if you are refinancing to reduce your overall monthly payments, either by rolling credit card debt or other consumer debt into your mortgage. The overall costs should eventually "pay back" any cost to the refinancing. However, if you are doing this to avoid bankruptcy, then you need to consider your financial health first, and recouping your costs second.

If you have decided that refinancing works for you, be sure to comparison shop! Also, read all the fine print on your current mortgage. Some have prepayment penalties, and they can be quite high.

Refinancing to Reduce Interest Rate

Melody Aguilera (WealthBridge Mortgage) — Sun, 05 Nov 2006 12:43:46 -0600

Yahoo! The rates are dropping! But you've still got 3 years on your mortgage and you're paying a couple percentage points more than the going rate.

What to do?

Your best option is to approach your current lender and try to get an 'early renewal' on your mortgage.

Some lenders will charge a penalty for early renewal. You will have to determine if the cost of the penalty is less than the savings you will get with the new mortgage. If not - you'll be best to wait.

Some mortgage lenders will renew early without penalty, but will give you a 'blended rate'. What this means is you will have a 'new' mortgage, and you will be paying a rate that is a 'blend' of your existing interest rate and the new current interest rate.

Confused? Don't worry. While it is a bit complex, it boils down to this - based on the term picked for the 'renewal' and the time left on your current mortgage, the lender will 'blend' the two interest rates. So you will be paying a 'blend' of your existing rate and the new lower rate. While you won't get a rate as low as the lender's current best rate, you should find that you will be paying a lower rate overall than if you'd stayed at your existing interest rate.

Again, do your homework. This is only a good deal if you have a fair amount of time left on your mortgage, and you are confident that interest rates won't fall a lot further! If interest rates continue to go down, and you are now locked into a longer term at the blended rate, you may find that it wasn't a good deal.

Still confused? Talk to a financial planner or advisor. They can take all the confusion out of this.

Refinancing for Extra Cash

Melody Aguilera (WealthBridge Mortgage) — Sat, 04 Nov 2006 12:32:04 -0600

With the cost of homes, it's often better to buy what you can afford and remodel later!

Once you are ready to remodel, particularly if you've lived in the house for a few years or have some equity built up, you may find that your best option is to refinance.

Most lenders are willing to discuss refinancing to get you some more money. What they are really doing is looking at the current value of your home versus the amount you have mortgaged, and they give you some cash back from the difference. This means that your mortgage gets bigger - and the cash difference comes to you.

This can be a better deal than negotiating for a separate home improvements loan, but be careful! You always have to read the fine print:

First, be sure that you will not be paying fees to do this. Your mortgage lender already has your business, right? You are offering them MORE business, right? As long as you are a good customer, they should be thanking you! You are going to make them money. At worst, fees should be minimal, as long as your credit rating and history are good.
Second, be sure that the interest rate for your new mortgage is fair. Do some homework, and ensure that just because you are refinancing doesn't mean that your lender is taking an opportunity to get more out of you.
Be sure when you are comparing interest rates that you also look at the rates of home improvement loans. You may actually be better off to have a separate home improvement loan. However, it depends on whether you can handle the amount of the home improvement loan, as well as interest rate. Home improvement loans are often over much shorter periods than a mortgage. Therefore, even if the interest rate is much lower, you may have a payment which is too high for you to handle. So, you'll need to know both interest rates AND payment amounts to compare home improvement loans with mortgage refinancing.
Be sure that your mortgage lender knows that you are comparing options. If you want your lender to compete for your business, you should be knowledgeable. Don't be browbeat into something because they are 'doing you a favour'.

Once you have your cash in hand - happy renovating!

Refinance at Renewal

Melody Aguilera (WealthBridge Mortgage) — Sat, 04 Nov 2006 12:30:36 -0600

Your mortgage is up for renewal. Your lender has called you, and suggested they can handle your business, you've been a good customer. Why don't you just come in and sign some papers? So, you make an appointment, and you go in, without another thought.

Is this the right approach? Nope.

When your mortgage is due for renewal, it is an ideal time for you to shop around and really understand interest rates. It might be worth your while to move your mortgage to another lender - particularly if the competition is good and interest rates are lower elsewhere. While another company is competing for your business, they may also offer you other benefits you aren't getting now - including paying any fees associated with moving your mortgage.

Doesn't moving your mortgage mean a lot of hassle? Not really. But do your homework. First, check your current mortgage and understand if there are any fees associated with moving your mortgage. (This kind of fee is extremely common - and you should expect it.) Once you know there are some costs to you, you should be looking for a lender who pays those fees.

Second, shop around. Is your current lender offering you a really good rate? Perfect! You may not want to move. Just go ahead and renew. However, if you can save somewhere else, then you should likely move, especially if your mortgage is for a large amount or you still have many years on it. Why? The long term costs of your mortgage are the result of the interest you pay over the life of the loan. The more you save in interest in the early part of your mortgage (when the amount owing is still high) the less it will cost you over time. If your mortgage is for a very small amount, or you will be mortgage free in 5 years or less, and you are saving less than ½ percent, you may not want to move your mortgage. The savings may not give you enough 'pay back'. Be sure you know how much the fees are to move it, and compare that to what you will be saving. If the fees are more than you save - stay put.

Third, are you getting the kinds of other options you want? Does your mortgage allow you to make lump sum payments whenever you want (or do you only have 1 day a year, on the anniversary)? The open ability to pay extra, from as little as $100 to 10 or 15 percent of the mortgage value, can make a huge difference in the long term costs to you. Every extra payment you make is money directly to the 'principal' of the loan. This means less loan that you are paying interest on!

While it takes some legwork, if you shop carefully and make the mortgage lenders compete for your business, you will usually do better.

Mortgage Refinancing

Melody Aguilera (WealthBridge Mortgage) — Sat, 04 Nov 2006 12:29:06 -0600

For many people, refinancing their mortgage is another way of saying 'renewal'. Their bank or lender calls them up and says, "It's time to renew your mortgage." They have a short discussion on the phone, which results in the signing of new papers for another term, without too much thought. However, this isn't really refinancing.

Refinancing is generally something you do to get access to the equity in your property.

Refinancing is a necessity for some because they need some extra money for the house. They want to make use of some of the equity that has built up in their property. This means that they need to negotiate for a new mortgage - at a higher amount than they had before.

And then again, it could be that your interest rate on your mortgage is too high, and you want to refinance to get that rate down. If you negotiated a mortgage when your credit rating was not as good, and you've repaired your credit now through a good track record of payments, you should certainly refinance. In a volatile interest rate market where rates are dropping and you are locked in at a much higher rate, it can be to your advantage to pay those penalty clauses and get yourself a better interest rate.

Your best reason to refinance is to lower your interest rate and consolidate your debt. Of all the reasons to refinance, this is one where you are going to benefit without a doubt. If you are carrying a lot of credit card debt and are finding yourself in over your head, refinancing can get you out of the hole and in position to turn your financial situation around.

Regardless of the reason that you are looking at refinancing, you should weigh all the pros and cons carefully.

Always be sure that you are lowering your overall interest costs when you refinance. You should check this even when you want to refinance to get access to money to renovate. If you could buy your materials through a no interest deal with a home renovation store, you might not really benefit by refinancing now. Many of the large stores in home renovations have credit cards that will give you 6 months no interest. The trick is that you have to be willing to pay the purchase off in that time period, or pay the much-higher credit card interest rates.

In general, however, the "cheaper" the cost of borrowing, the better it is for you. If you take that credit card and find that you won't be able to pay it off before the no interest period is over, you should consider refinancing. It will save you a lot of money over any credit card debt.

Saving Money on Your Mortgage

Melody Aguilera (WealthBridge Mortgage) — Sat, 04 Nov 2006 12:27:24 -0600

However, you have to be careful. The shorter the amortization, the higher the payment. So, while you save money over the long run because you pay less in interest charges for your loan, you have to be able to afford the payment in the short term.
One option which reduces your risk and still lets you save money is to keep your mortgage at a 25 or 30 year amortization, but increase your payment. Most mortgage lenders will let you do this without penalty. Increasing your payment by even a very small amount will let you pay off your mortgage years earlier, while leaving you the option of reducing your payment back down to the original amount in the case that you need that money.
So, let's say you get a 5 % raise this year. If you have the right mortgage you could simply increase your mortgage payment by 5%. While a very small change in the amount that you pay per payment, it will make a big difference over many years. Every penny of that extra 5% is paying off the balance (or principal) of your loan.
Then, a new baby arrives. You want the 5% back? You reduce your payments back down and away you go.
Remember that most mortgage lenders will have some restrictions on the amount that you can increase your payment and the number of times you can adjust it.
The other way to really cut the time off your mortgage is to make lump sum payments against it. Can't see your way to increasing your payments? Fine. This year, take your yearly bonus and put it directly against your mortgage. Again, every dollar will reduce the balance of your mortgage and will mean that you pay less interest in the long run. Even small amounts every year will reduce the amount of time it takes to pay your mortgage off - and who doesn't want to be mortgage-free?

Mortgage Interest Rates

Melody Aguilera (WealthBridge Mortgage) — Sat, 04 Nov 2006 12:24:08 -0600

An important aspect of your home mortgage is the interest rate. This rate is negotiated for a period of time - from 6 months to as long as 10 years. This time period is the period over which you will pay the agreed interest rate.

The lower your interest rate, the less you pay in interest costs over the life of the mortgage. This can also save you thousands of dollars, especially on the mortgage you negotiate when you first buy your property.

When you first buy your property the amount of your mortgage will be the biggest it will ever be. At this point, the majority of your payments will be interest charges and a smaller amount will be used to reduce the 'principal' (which is the amount of money borrowed.) Therefore, the lower your interest rate, the less you are paying on this large sum of money - and the more money you save in the long run.

How do you get the best interest rate? Shop around. Be sure to negotiate. Your business is the lifeblood of a lender - remember that you are going to make them money. While they may want you to think that they are doing you a favour, in reality you are doing them a favour - as long as you are paying off your debt as you should!

A final word on interest rates: mortgage lenders 'stack' the deck in their own favour. Any interest rate they are willing to charge is at a level at which they believe they will make money. This is certainly not a charity business. Now, if you 'lock in' your interest rate for 5 years you will likely pay more for your mortgage. Why? Because they want to ensure that they will make money even if rates go up. So, anything which you do to reduce your risk (like locking in payments), you can expect to pay more for because you raise risk to the lender.

However, if you are willing to accept a bit of risk at your end (particularly if you have a stable job and a good credit history) you are almost always better off with variable rate mortgage. This type of mortgage allows the interest you pay to fluctuate with the market. While this sounds risky, it actually allows you a lot of freedom and almost always saves you money, for two reasons:

The interest rate charged on variable rate mortgages are usually much less than any 'locked in' rate
If the rates look like they will go up you can generally switch to a 'locked in' interest rate at no penalty.

In other words, you can't lose with the variable rate type of mortgage (as long as you can switch without penalty).

Is Your Credit Bad?

Melody Aguilera (WealthBridge Mortgage) — Mon, 30 Oct 2006 00:31:36 -0600

Bad credit is a big factor in any lender's mortgage process. In fact, some lenders will not even consider someone who has bad credit. So, your credit history and credit score are critical to you getting a loan and getting a lower interest rate.

What's a credit score? The most common credit score is the FICO score. A FICO score of 620 or less indicates bad credit. What a FICO score or any other credit score do is rank you and your credit history against a scale. The higher your credit score, the better credit history you have overall.

Fundamentally, your credit score combined with your credit history help mortgage lenders decide how much credit to give you and what interest rate you qualify for. So, the better your credit history, and the higher your credit score, the more likely you are to qualify for the lowest interest rates and best mortgage options.

How did your credit get bad? Well, if you have never had credit it may be bad because you have no payment history. That's easy to fix. On the other hand, you may have a bad credit score because of your bad payment history. While this can also be fixed, it will take longer.

How did you end up with a bad payment history? It's actually pretty easy. Many organizations report to credit bureaus every time you miss a payment. So, if you've been late with your phone bill or electricity bill or gas bill it's likely on your record. Each time this happens, it will lower your credit score.

Who reports late payments? Any organization that is collecting payments can potentially report late payments. Some organizations don't report a late payment unless there is a 'history' of problem. But you cannot rely on that.

If you have bad credit, you need to understand exactly how bad it is. Your first step is to obtain a "tri-merged credit report", which will also contain your credit scores.

What the heck is a "tri-merged credit report"? A "tri-merged credit report" is a complete credit report, with as much history as has been reported on you. This information is kept by credit reporting agencies.

There are 3 main credit-reporting agencies used by the mortgage industry. They are Equifax, Trans Union and Experian. These credit agencies or bureaus will pull from their files a credit report for a lender when a credit check is requested. The tri-merged credit report is a compilation of the information received from all three agencies.

Bad Credit Mortgages

Melody Aguilera (WealthBridge Mortgage) — Mon, 30 Oct 2006 00:30:10 -0600

While you might be in a tough spot, with financial woes and credit agencies at your heels, there is light at the end of the tunnel. And it might just come in the form of a bad credit mortgage.

Or, you might have "bad credit" because you just haven't had any credit in the past. If you've never had a loan or a credit card you will have a low credit score. A bad credit mortgage might also be for you.

What's a bad credit mortgage? It's a chance to establish credit if you don't have any and can't wait. It's a second chance if you have already had credit and done a bad job. If you already own a home it can also be about refinancing.

Regardless of why you are in this situation, if you have bad credit you will need to find a mortgage lender that will work with you. That lender will understand that bad credit can happen and often there is a good explanation. You can check your credit score online

In effect, a bad credit mortgage can give you the opportunity to:

Establish or clean up your credit
Get some relief from high interest debt
Consolidate existing bills into one monthly payment
Get relief from current creditors by paying them off
Get extra cash for extensive home repairs, or emergencies
Leverage you out of a possible bankruptcy

Home Buyer's Checklist

Melody Aguilera (WealthBridge Mortgage) — Mon, 30 Oct 2006 00:28:16 -0600

Home Buyer Checklist	1	2	3
Property Address	____________	____________	____________
Asking Price	$___________	$___________	$___________
Real Estate Taxes	$___________	$___________	$___________
The Neighborhood
Near Work
Near Schools
Near Shopping
Near Expressways
Near Public Transportation
Near Doctors/Dentists
Near Churches
Garbage Collection
Street Lights
Sidewalks
Streets/Alleys Well Maintained
Traffic Volume
Parks
Neighbor's Property Well Maintained
All Utilities Installed
Neighborhood Covenants/Restrictions
Near Trains/Airport
Area Zoned Residential
Near Industry
Proposed Special Assessments
Environment Concerns/Influences
The House
Age of House	____________	____________	____________
No. of Stories	____________	____________	____________
Wood Frame
Brick Frame
Wood & Brick Frame
Aluminum Siding
Roof Condition	____________	____________	____________
Foundation Condition	____________	____________	____________
Overall Exterior Condition	____________	____________	____________
Garage Size	____________	____________	____________
No. of Bathrooms	____________	____________	____________
No. of Closets	____________	____________	____________
No. of Bedrooms	____________	____________	____________
Oil Heat
Gas Heat
Electric Heat
Hot Water Heat
Insulation
Central Air Conditioning
Energy Conservation Features
Age of Heating System	____________	____________	____________
Age of Water Heater	____________	____________	____________
Capacity of Water Heater	____________	____________	____________
Age of Electrical Wiring	____________	____________	____________
Plumbing condition	____________	____________	____________
Estimated Water Bill	$___________	$___________	$___________
Estimated Heating Bill	$___________	$___________	$___________
Estimated Electric Bill	$___________	$___________	$___________
Living Room
Fireplace
Separate Dining Room
Family Room
Drapes - No. of Rooms	____________	____________	____________
Carpeting - No. of Rooms	____________	____________	____________
Kitchen Eating Area
Refrigerator
Stove/Oven (Gas/Electric)
Garbage Disposal
Dishwasher
Broken Windows
Storm Windows/Screens
Washer/Dryer Outlets
Laundry Space
Finished Basement
Attic
Sump Pump/Drainage
Connected to Sewer System
Patio
Backyard Fence
Landscaping
Property Boundaries
Security (dead bolts, detectors)
Building Code Compliance
Ability to Expand/Enlarge House

A Mortgage Loan After Bankruptcy

Melody Aguilera (WealthBridge Mortgage) — Mon, 30 Oct 2006 00:24:05 -0600

Are you ready to buy a home, post bankruptcy? Start by determining how much house you can afford. This is critical. You don’t want to get into the same money squeeze as you were in before. Including principal, interest, taxes and insurance, it’s a pretty safe estimate that you can afford to pay a mortgage equal to 20% of your pretax income.

Lenders will often preapprove you for up to 28% of your pretax income, but you’re best to avoid this temptation. Let’s work out the numbers: with $50,000 in annual pretax income, your lender will likely approve you for a monthly mortgage payment of $1,150. That’s 28% of your monthly income, and it would allow you to qualify for a $150,000 mortgage. At 20% of your pretax income, however, your mortgage payment would be a more manageable $833. This would mean a $120,000 mortgage. This kind of thinking ensures that you leave yourself some available income for emergencies. Let’s face it: the car breaks down; the kids need braces; and life often throws us a curve.

In general, once you know how much house your lender thinks you can afford, shop for houses that sell for about 15-20% less than the lender’s estimate. This is another way to ensure that you are protecting your financial future.

When you talk to lenders about pre-approval, don’t try to hide your bankruptcy. However, be sure to also show them the great job you’ve done rebuilding your credit in as short a time as possible. You have to remember that a Chapter 13 bankruptcy stays on your credit report for seven years, while a Chapter 7 bankruptcy stays on your credit report for 10 years. It’s best for you to get used to handling questions regarding your bankruptcy with confidence and a straight-ahead approach.

When you apply for a mortgage after a bankruptcy, you won’t generally qualify for the best rates. Typically, lenders will consider loaning you money again when it has been at least two years since you filed for bankruptcy and you've stayed current on your bills over that period. That has to be a critical piece in your building of a new financial stability.

One point of interest to keep in mind: A person in a Chapter 13 bankruptcy who is meeting the terms of repayment will have an easier time re-establishing credit than someone who discharged debts in a Chapter 7 bankruptcy.

Banker vs Broker - Which is better?

Melody Aguilera (WealthBridge Mortgage) — Mon, 30 Oct 2006 00:21:37 -0600

Brokers Confirmed

Oct.26, 2007

Study Reveals Brokers Are Less Costly Option For Sub-Prime Borrowers
New Study Finds Factual Evidence That Consumers Pay Less With a Broker

Washington, DC. – October 18, 2006 – Brokers are a more cost-effective option for consumers in the subprime home loan market, according to a joint study released by economists at George Washington and Oklahoma State universities.

The study compared sub-prime loans originated by brokers and traditional lenders such as banks between 1995 and 2003. Its findings reveal that the reason brokers originate more than 50 percent of all residential loans is because they are a more efficient and cost-effective option for consumers.

“Brokers are small business men and women who have to be competitive to remain in business,” said NAMB President Harry Dinham. “The hard data in this report is a clear sign that this competition is benefiting consumers in the sub-prime market.”

Dinham said that it is unfortunate that some groups have tried to use anecdotal evidence to accuse brokers of encouraging consumers to choose loans that are more profitable for the originator. This is commonly called steering.

The study notes that, “The evidence does not support the hypothesis that customers of brokers generally pay higher prices than customers of lenders because of steering… One can conclude only that in the sub prime market brokers’ customers generally paid less than lenders customers.”

“Unlike many of the largest lending institutions, most brokers are members of their community who help originate loans for the same people we spend time with at Kiwanis Club meetings and Little League games,” said Dinham. “Our reputation is the heart of our business and it only makes sense that we would do everything in our power to make sure our customers are treated fairly.”

The report used data from ten large sub-prime mortgage lenders and was conducted by the George Washington University School of Business and its Financial Services Research Program

Mortgage After Bankruptcy

Melody Aguilera (WealthBridge Mortgage) — Sat, 28 Oct 2006 00:52:38 -0500

If you've had the unfortunate experience of going through a bankruptcy, here's some good news: there is "life" for your credit score, post bankruptcy!

One of the best things you can do, first and foremost, is rebuild and repair your credit score. After a bankruptcy, your credit score will be quite low. As this 3-digit number is what most lenders use as a critical part of assessing your qualifications as a borrower, it's important to get it moving in the right direction (higher) as soon as possible.

One of the ways that you can get your credit repaired is to get credit! Amazingly enough, almost anyone can get credit relatively soon after a bankruptcy. But you need to know how. A mortgage is not generally the right place to start; you'll be able to get one a bit later, after you've done some footwork.

Even if you have had a bankruptcy, there are mortgage lenders who will give you a "secured" credit card. This is a great way to start. You may be able to get one with as little as $200 in an account to guarantee payment of the card. (This is what makes the card "secured".) Your spending limit will equal the amount of money that you have put up as guarantee. Interest rates are likely to be high on such cards. Use the card for the occasional purchase. Those purchases should amount to about 30 % of your limit and no more. It's wise to pay off the balance on time. (You don't need to carry a balance to build your credit score.) This simple and no-nonsense approach will start your credit score heading up.

Don't be seduced into any secured card. Pick one with no application fee and a reasonable annual fee. Make sure the card issuer reports regularly to the credit bureaus; call and ask! After all, you are doing this to build your credit score. Also, your secured card should convert to an unsecured card after 12-18 months of on-time payments. After all, you've provided a track record of good payment.

Speaking of credit bureaus, ensure that your credit history is accurate! While the bankruptcy itself may remain on your record for up to 10 years, that doesn't mean that all the problems that led to the bankruptcy should stay on your report. If your report shows accounts that are open and overdue (when they have been "closed" by virtue of your bankruptcy), make sure those entries are removed. You'll have to contact the credit bureaus to do this; when you do, insist that old accounts be properly reported as "included in bankruptcy". At the same time, make sure that any other errors are cleared up, and that your current contact information is correct.

Another simple strategy? Open a savings account, and save 5% of your pay. Savings will also help build your credit score, and will also provide you with a cushion of money in case of emergency.

The other thing that will build your credit score is an "instalment loan". As a result, a car loan can help you build more credit-worthiness. Just be prepared to pay astonishing rates of interest at first. You might start out with interest as high as 20 % or more. Given that, only buy the most affordable vehicle, and consider trading it in early. By the time you've established a good payment record on your car loan for a couple of years, your interest rate will drop substantially.

If you don't want to pay punishing rates on a car loan, you can go directly to a mortgage, once you have done some credit repair with a secured card and a good payment history on your other bills, such as your utility bills. (Most utility companies do report to the credit bureaus.) If your next move is a mortgage, there are lenders who will work with you. They are sometimes referred to as "B-C-D" lenders. But again, be prepared to pay high fees and high interest rates.

You'll do better if you have as large a down payment as possible, but don't despair. Different B-C-D lenders will have different programs, and while you may not qualify for one, you could be perfect for another.

If you are ready for a mortgage, make sure your housing costs are affordable. This is your best bet for avoiding bankruptcy again in the future. You might even want to buy a little less house than you could, and put away a bit of money each month for those unexpected emergencies that can push a solid financial footing over the edge.

Choosing the Right Mortgage

Melody Aguilera (WealthBridge Mortgage) — Sat, 28 Oct 2006 00:50:41 -0500

Perhaps the single biggest decision you make when buying a home (other than picking the home itself) is finding the right mortgage. The "right" mortgage will get you the right payment options, the right interest rate and the right lender to work with. The wrong mortgage? Well, you could end up with trouble with a bad lender; you might end up paying thousands more if your interest rate is too high; and with the wrong payment options, you won't be able to get rid of your mortgage as quickly as you'd like. And after all, we'd all like to be mortgage-free faster, wouldn't we?

However, it can be very confusing choosing a mortgage. You have a lot of options! Do you want a traditional ARM? Do you want to lock in a rate for 3 or 5 or 7 years? Longer? Do you want to be able to have lots of choices in payment options? All these things require you to think about your spending habits, the kind of employment you have, and your tolerance for risk.

In most cases, the mortgage with the most flexible payment options gives you the most options in how you handle it. This can be especially useful if you have a type of "irregular" income, whether you are paid on commission or get a periodic bonus based on performance. If so, you likely want a mortgage that will give you the lowest possible regular payment (say a 30 year term) combined with the most generous extra payment options (say up to 25% of the total mortgage in a year, with no restrictions on amount, frequency or size of payment up to the 25% maximum). This kind of mortgage will allow you to pay off your mortgage as quickly as you can, while also giving you the security of knowing that you should be able to handle your monthly payment.

Perhaps you'd like to pay your mortgage off as quickly as possible, and you've just got a new job with a much higher salary. Well, in this case, you might actually want to shorten the term of your mortgage loan! The amount of money you will save if your mortgage is amortized over 15 or 20 years (as compared to a 30 year term) is astonishing. You can save tens of thousands of dollars. Of course, this approach will only work if you have the money to afford a larger payment and if you have the job security to allow you to take this approach without undue risk (like missing payments).

What if you took a shorter amortization last time you renewed your mortgage, and now you are finding the payments too high? It's time to talk to your lender. Many lenders will cheerfully renegotiate your mortgage (including a longer amortization period) if you are willing to lock in with them for a longer term. If you have 3 years left on a 5-year mortgage, you could offer to lock in for another 2 years (to give them another 5 year horizon with you) and they may then be happy to give you a longer amortization period as part of the deal. Most lenders will be very happy to work with you if you have a good credit history. Even if your credit history is a little spotty, your lender usually does better if you pay off your loan on time and regularly, than if they drive you into a foreclosure. Consider talking with your lender.

As for the majority of us, how do you know how to pick a mortgage? In general, stick with a 20 to 30 year amortization. This usually gives you a manageable payment. Also, consider your own tolerance for risk when picking a type of mortgage. The standard ARM mortgage gives you some predictability in interest rate as well as a chance to take advantage of lowered interest rates over time. However, it will also expose to you rising interest rates over time. This is the gamble with it. Most of us are willing to take some gamble in order to have a lower interest rate up front. This makes sense because your highest interest costs are also when your mortgage is at its largest amount. But you could end up with higher interest rates in the future, which will also mean higher payments.

If you don't like the idea of your payment changing as interest rates fluctuate, lock in to a rate for a longer term. You will pay more in interest for the privilege of locking in, but you will also know the exact amount of your payments for the full term of the mortgage, whether 3, 5, 7 or 10 years. Many people like this kind of security, and will find that their income goes up over the term of the mortgage, making life much more comfortable along the way.

So, keep in mind your life, your financial plans and your type of employment. Then, pick the type of mortgage that fits you.

Fixed Rate Mortgage

Melody Aguilera (WealthBridge Mortgage) — Sat, 28 Oct 2006 00:47:49 -0500

A large majority of people choose the fixed rate mortgage. This mortgage guarantees a certain interest rate for a period of time. The most popular fixed mortgages are 3,4 and 5 years. However, you can have a fixed mortgage for as short as 6 months or as long as 10 years.

The biggest selling feature of fixed mortgages is the 'guarantee' of the payment that you will be paying. However, if you pick a long-term fixed mortgage - say 5 years - you'll pay a lot for the privilege of having your interest rate locked in. In general, unless interest rates are steadily climbing you'll pay more in interest costs over the life of your mortgage if you choose long term fixed each time.

Why? You'll actually pay a much higher interest rate over a longer period unless interest rates go up fairly significantly.

In my own case, I stayed with terms of 6 months on my fixed mortgage and found that I was averaging from ¾ to 1 full percentage less in interest rates than those who had locked in at a five-year rate over the same time period. However, there are some caveats:

This strategy works best when interest rates are staying fairly stable (within 1 percentage point or so) or are falling.
You should have a mortgage lender who will allow you to lock in to a longer-term mortgage if rates go up and without a penalty.

If you have these two features through your lender go ahead and get a short-term fixed mortgage. The only downside is signing papers for your next term on a more frequent basis.

When looking at fixed rate mortgages don't be fooled by fancy promotions like cash back and other things. These incentives are usually restricted to 5 year and longer fixed rate mortgages. The lender can afford to give them because you are going to be their customer for a long time. Further, they don't reduce your interest rate which is the one thing that will really benefit you.

Your other best bet in an interest market where rates are staying the same or dropping is usually some form of 'variable' or 'adjustable' mortgage. These mortgages will allow you to get a better rate now in general (while the amount of your mortgage is higher) and will allow you to take advantage of fluctuating rates (which are hopefully moving in your favour). Again, you must have the option to lock in if rates go up. This will allow you to manage your risk. Simply keep a sharp eye on interest rates. Pay attention to what the analysts are saying about the short and longer-term future of rates. Then lock into a fixed rate mortgage from your variable or adjustable one.

This gives you the best of all possible worlds, including the lowest interest rate now and options later. But you have to make sure that you HAVE this option. Read the fine print. And be sure to ask your lender if it is possible before you sign the fixed rate mortgage papers.

Interest Only Mortgage

Melody Aguilera (WealthBridge Mortgage) — Sat, 28 Oct 2006 00:46:25 -0500

An "interest-only" mortgage is like a line of credit. You can pay only the interest on the mortgage. This can greatly reduce your payments in time of financial stress. However, it also means that the debt will never be paid off.

With an interest only mortgage, you pay only interest for the first five, 10, even 15 years of the loan. This can lower your monthly payment by quite a lot. And that seems to have increased the popularity of interest only mortgages in the past few years.

The interest only mortgage is an interesting mortgage type. All you pay over the life of the mortgage is the interest on the balance. However, there are options once this interest only period ends. You either begin to pay interest and principal at a faster rate than if you’d done that from the beginning, or you can choose the balloon mortgage approach, which means the total loan principal becomes due at the end of your term.

When do interest only mortgages become more popular? Typically, as interest rates rise and the cost of housing increases, more people will look at this type of mortgage. Why? At issue for some consumers is the size of their mortgage payment and making that payment lower. At the same interest rate, an interest only payment is less than a payment of both interest and principal. A lower payment can mean that you will have a higher budget for home shopping. And that makes a big difference for some home buyers.

Many interest only mortgages have an interest only period (5 to 15 years) and then you begin to pay both interest and principal. If your interest only mortgage has a term of 30 years, after your initial interest free term, you would begin to pay interest and principal. You would begin to pay principal as well as interest in order to pay-off the balance by the end of 30 years. This actually means that your payments will be considerably higher than they would have been if you’d paid off principal all along.

Other interest only mortgages are like balloon mortgages. However, most balloon mortgages would ensure that you are paying down the original principal over time. When you pay your final balloon payment, it would be less than the original loan amount because of your payments of both interest and principal. With an interest only balloon mortgage, your final payment should be exactly equal to your original loan amount. All you’ve paid is interest; all the principal of the loan remains.

When would you consider this kind of loan? The circumstances to consider this kind of loan would be unique. Usually, a family with a single wage earner should not be considering this type of mortgage. Your exposure to financial risk would be too high. However, investors might be interested. The advantage with an investment property, that you expect to go up in value, is that the interest you pay is tax deductible. Therefore, you can deduct the interest paid from your taxes, while you own the property. At the end of the period of the loan, you could then sell your property (hopefully at a profit) and take the returns to pay out the mortgage.

However, this is a gamble. There’s no guarantee that the property appreciates in value. And there’s no guarantee that you can sell it when you decide to. If you can’t sell the property, you would have to refinance (unless you have made enough from the property to pay out the balance of your mortgage) and refinancing could cause you some challenges.

The other advantage to this kind of mortgage is that you can save or invest the money that you would have paid in principal on the loan. Again, this situation will usually favor investors of one kind or another.

Interest-only loans come with many of the options of other types of mortgages. With some, you can lock in a fixed interest rate for the full term, while others resemble adjustable rate mortgages (ARM), which carry a fixed rate for a certain number of years and then adjust every six months to a year.

What kind of savings are you looking at on your monthly mortgage payment? They can be significant. Let’s look at an example: You borrow $200,000 using an interest only loan with a 4.75 percent rate and no principal payments due for five years. Your monthly payment will be just $791, or about $250 a month less than if you went with a regular 5-year ARM with the same interest rate.

This can really work for you, if your property appreciates in value. Of course, there's never a guarantee that prices will go up. And if you don’t sell your property as planned, your monthly payment jumps drastically after your interest only period. You’ll have to be prepared for that.

Interest-only loans can also make sense for people whose income is sporadic, either because they are paid on commission or because they receive a significant portion of their income in annual bonuses. In this case, you have the option of only paying interest some months, but can pay above and beyond the amount due when they get their bonus checks. There is typically no prepayment penalty on interest only loans. This gives you flexibility in applying extra money to your mortgage when you have it, and yet keep monthly payments low.

Adjustable Rate Mortgage

Melody Aguilera (WealthBridge Mortgage) — Sat, 28 Oct 2006 00:43:35 -0500

Adjustable rate mortgages do what you'd expect - the rate 'adjusts'.

It works like this: With a fixed rate mortgage your monthly payments will be the same over the life of the mortgage. You'll always know what you'll have to pay. In contrast with an adjustable rate mortgage (sometimes called an ARM) your payments will change over time.

The mortgage payment will be 'adjusted' when the interest rate is adjusted. You can expect the interest rate to be adjusted at regular intervals.

Usually, you start with a period of a year at a fixed rate. This rate is often quite low, as an incentive to get an adjustable rate mortgage. Then, after the initial fixed period the interest rate is usually adjusted yearly to reflect the current rates. If the rates go down so do your mortgage payments. But if the rates go up, your payments will go up.

Here's an example: a "3/1 ARM" is fixed at an initial low rate for the first 3 years, and then adjusts every year based on an index. Common adjustable rate mortgages are: 1/1, 3/1, 5/1, 7/1, and 10/1. These adjustable rate mortgages stay fixed for 1, 3, 5, 7 or 10 years and then adjust every year.

In general, if you are interested in an adjustable rate mortgage take a relatively short fixed term - 3 years is likely the best; depending on the interest rate you are offered for the fixed term.

The benefit of ARMs is you have periods of fixed interest and then opportunities to take advantage of current interest rates. If rates go down, you benefit. The problem is that you may find your rate adjusting during periods of rising interest and this can mean higher payments and more money out of your pocket. But these do give you some of the benefits of variable rate mortgages with more stability for those who want to mitigate the risk of a variable rate mortgage.

However, as with all good deals check the fine print. Sometimes, an adjustable rate mortgage can cost you more in the long run, especially after the initial incentive interest rate is replaced by an adjusted rate. Know what you are getting into.

The Home of Your Dreams

Melody Aguilera (WealthBridge Mortgage) — Thu, 26 Oct 2006 13:02:29 -0500

The home of your dreams may not be the home of my dreams. Some of us like an older home with character. Some of us like a brand new home for which we've picked every floor covering and the colours of every wall. Some of us like something in-between, where it's new enough not to need a roof, but old enough to have been fully decorated by the previous owners.

This is what you have to decide. What kind of home do you want? Condo apartment? Townhouse? Bungalow? Two-storey century home? A little place in the country? It's up to you.

If you are buying your first home, your dream home may have to be more modest than you might have hoped. But fear not! Once you own a home and build some equity in it you might just be able to buy up. It's much easier to do once you actually own your home. If you stay out of the market and continue to try to save you may find that the price of housing goes up faster than you can save.

Buying a Home

Melody Aguilera (WealthBridge Mortgage) — Thu, 26 Oct 2006 12:55:09 -0500

Buying a house is a very exciting time. Congratulations on your decision!

The good news is that if you do the legwork and set the right wheels in motion you can be in your own house in a fairly short time. The bad news is that you can expect that there will be lots to do before you get there.

Your house is likely to be the single biggest purchase that you will make in your lifetime. As such, it makes sense to take a careful approach when buying a home. We all know people who will spend months researching the perfect stereo system. A stereo system costs a fraction of what your home will cost! So consider taking a few months, taking each step thoughtfully and making sure that you are getting the right deal for you.

When you are thinking about buying a home, you have to consider what kind of homebuyer you are. Are you the kind who likes a challenge and would love a "fixer-upper"? Are you the kind of person who likes to move in and have everything "done"? Are you okay with living with the decorating style of another, even if it's not quite you? Do you want a "blank slate" to start with? The type of homebuyer you are depends on how you answer these kinds of questions.

Here's a story for you: A couple (we'll call them Michael and Liz) went shopping for a house. They looked at all sorts of things in their price range, but didn't find anything they "liked". They had been looking at older homes. A couple of months later, they happened to stop by the sales office for a new home development. They walked out having signed papers to buy! Why did this happen so fast? Because Michael and Liz just happened to be "new home" people. They wanted a blank slate to start with. They weren't able to see past someone else's decorating. And they didn't want the hassle of a "fixer-upper". With the new home, they had the chance to pick their own finishes, and have the house look the way they wanted, right from day one.

So, which kind of homebuyer are you? You can save yourself a lot of time and effort in the house hunting, if you know that now. However, you can also be confident that looking at homes will eventually show you what kind of homebuyer you are.

There are pitfalls along the road to buying a home. This can happen either with the purchase of a new home or an older home. Take a look at our buying a house information and see what you can do to avoid some of the challenges.

RENT or BUY?

Melody Aguilera (WealthBridge Mortgage) — Thu, 26 Oct 2006 12:22:42 -0500

Affordable?

Great Time for Buyers.

Record low interest rates make now an
affordable time to enter the market. In some cases it’s possible to receive a loan for 100% of the purchase price with 0% down!

The Investment

Build Up Equity.

Homeowner tax advantages… Interest & Property taxes are DEDUCTIBLE… as well as payments to principal put money back in your pocket. Money spent on rent is just… GONE.

The Dream

Start Small.

It might not be your dream home, but smaller houses typically appreciate
considerably faster… about 20% more than larger ones. It’s an advantage to become a homeowner sooner rather than later.

What is an 80/20?

Melody Aguilera (WealthBridge Mortgage) — Thu, 26 Oct 2006 12:19:07 -0500

80-20 Mortgage Loan Programs

Home and condo values have escalated in recent years and home buyers are looking for alternative programs to increase their purchasing power and keep their monthly mortgage payment as low as possible. The 80-20 30 Year Fixed and Interest Only mortgage loan programs have grown tremendously in popularity because they are designed to help you qualify for more home, keep your monthly mortgage payment low, and to avoid PMI (Private Mortgage Insurance) which is insurance designed to protect the lender from individuals who default on their loans and who have less than 20 percent equity in their property. Borrowers do not want to pay PMI because it usually increases their mortgage payment and it is not tax deductible.

80-20 30 Year Fixed Program

The 80 20 home loan program is a zero down loan program which you have a 1st mortgage for 80% of the purchase price and a 2nd mortgage for 20% of the purchase price. Let's take a look at an example of this program versus traditional zero down program with PMI :

Assumptions: $200,000 purchase single family home, 5.75% interest rate (5.79% APR), $3,000 year real estate taxes, 2nd loan is home equity with 6.25% rate, and 28% tax bracket.
	Traditional 30 Year Fixed	80-20 30 Year Fixed
1st mortgage loan amount	$200,000	$160,000
2nd mortgage loan amount	$0	$40,000
1st mortgage principal and interest payment	$1,167	$934
Home equity line payment-interest only	$0	$208
PMI-Private Mortgage Insurance	$160	$0
Real estate taxes	$250	$250
Total Payment	$1,577	$1,392
Tax Savings	$335	$340
After-tax payment	$1,242	$1,052

As you can see, the total payment is much lower for the 80 20 mortgage loan program plus the tax savings is greater* and there is no PMI. Also, you would qualify for approximately $30,000 more house in this example. Ideally, you would want to pay off the 2nd mortgage faster so you will be left with just 1st mortgage payment of $934 after the 2nd mortgage is paid off. The 80-20 30 Year Fixed mortgage is great for borrowers who intend to live in their home or condo for a long time.

80-20 5/1 ARM Interest Only Program

The 1st mortgage will be 80% of the purchase price and the interest rate will be fixed for 5 years. Borrowers will be required to make interest only payments but they can choose to pay more than the interest if they desire without any penalty. The second mortgage will be a home equity line and require interest only payments like the 1st mortgage. The payment is so much lower than a traditional principal and interest type loan and you would qualify with the interest only payment. Let's take a look at an example of this program versus the traditional 30 Year Fixed program:

Assumptions for 80 20 loan: $200,000 purchase single family home, 5.75% rate for traditional 30 Year Fixed mortgage (5.79% APR), 5.25% interest rate for 5/1 ARM interest only mortgage (5.29% APR), $3,000 year real estate taxes, 2nd loan is home equity with 6.25% rate, and 28% tax bracket.
	Traditional 30 Year Fixed	80-20 5/1 ARM Interest Only
1st mortgage loan amount	$200,000	$160,000
2nd mortgage loan amount	$0	$40,000
1st mortgage principal and/or interest payment	$1,167	$700
Home equity line payment-interest only	$0	$208
PMI-Private Mortgage Insurance	$160	$0
Real estate taxes	$250	$250
Total Payment	$1,577	$1,158
Tax savings	$335	$324
After-tax payment	$1,242	$834

As you can see, the total payment is $408 lower than the traditional 30 Year Fixed mortgage and tax savings is about the same*. Also, you would qualify for approximately $100,000 more home or $300,000 purchase price with this program. This program is designed for borrowers who will move or refinance within 5 years, otherwise the 30 Year Fixed mortgage loan option may be best for you. Finally, if you don't pay a dime toward the principal balance of the loan, you will still gain the appreciation in the property which could be greater with a higher priced home. Remember, you reduce the principal very little in the first few years of a traditional 30 Year Fixed principal and interest mortgage loan.

There are a few points worth mentioning here. The 30 Year Fixed and 5/1 ARM Interest Only programs above require good credit but there is an 80-20 program for borrowers who have a 580 middle credit score. Also, the 80/20 Interest Only Arm loan program can have many differerent options such as 6 month, 1 year, 2 year, 3 year, 5 year, etc. Also, there are 80-15-5 and 80-10-10 programs available for both fixed rate and arm loans which are 5% and 10% down payment options respectively but the mortgage payment will not be much lower for these programs. For example, your monthly payment will be approximately $90 lower for $200,000 purchase utilizing 80-10-10 5/1 ARM Interest Only program with 5.25% interest rate (5.29% APR). This begs the question: Couldn't you use the $20,000 for home improvements, furniture, or savings?

* * * * * * * * * * *

For Sale By Owner

Melody Aguilera (WealthBridge Mortgage) — Thu, 26 Oct 2006 12:14:40 -0500

You Can Do It Yourself…

And I Would Like To Help.

I am not a Real Estate Agent and I am not contacting you about listing your home.

Actually, I am a mortgage professional, and I would like to help you sell your home without the assistance of a Real Estate Agent. With your permission, and at no cost to you, I’d like to provide home mortgage information to
prospective buyers of your home.

My goal is to earn the business of the eventual buyer, through competitive interest rates and a swift, professional mortgage service. In addition, I would like to provide you with financing for your next home, too.

Would you like more

information?

Please don’t hesitate to call me.

Thank You.

If you feel that you need the asistance of a Realtor, call Jarrett Kozelisky of Brio Realty at 206-310-4466.