Your Questions About Mortgage Loan Type

Carol asks…

Does Fulton Bank have friendly mortgages?

I am very seriously considering taking a mortgage from Fulton Bank. They have a very competative rate, etc. I have never banked with them before, and I know that some banks really have alot of fine print and shady practices, and when dealing with a mortgage amount of money, I want to be especially cautious. I am not a lawyer, nor do I feel it necessary to bring a lawyer with to check it out, but was just wondering if anyone out there has a mortgage or has had one with Fulton and if there were any surprises or fine print that you feel I would probably want to know about? Thank you in advance! Also if there are any particular things I should ask them to try to expose the “shady fine print” if such a thing exists.

John answers:

Mortgage loan docs basically say, You are borrowing to buy a house. You are required to pay for the right to borrow this money from us to buy your house. Failure on your part to pay as required, will result in us foreclosing on what you used our money for. Most of the rest of the documents are RESPA required disclosures by the federal government. Banks and lenders are not out to get you.

Buying a house is a step by step process, this is the first step you should take in order to purchase a house. The rest of the steps will fall in place, no matter the type of property you are purchasing.

In order to find out the type of loan programs you are qualified for you will have to fill out a loan application, with a mortgage broker, which you can find one in your local telephone book.

Make sure this mortgage broker or mortgage banker is able to do government loans such as FHA and VA loans if you qualify for one. With a VA mortgage loan you are not required to have a down payment, this will save you on closing cost.

He will fill out this application, which takes awhile so grab your favorite beverage and sit down. Once you have completed the application, he will run your credit report which will have your credit scores. These credit scores will determine your interest rate.

The amount of your monthly debt payments you are required to pay as per your credit report and the amount of mortgage you can take on based on your income will determine the amount of house you will be able to purchase.

When you speak with the mortgage broker you will need the following documents to complete the loan application, there will be others, but this will get you started.

#1 One month of pay stubs for each person that will be on the mortgage.

#2 Six months bank statements from each bank in which you bank as well as statements from any 401K from you place of employment.

#3 Two years of federal income tax along with the W-2 that match.

Once he has all that he need to do he can then issue you a pre-approval letter so you can purchase a home. In this pre-approval letter will be the amount of house you are qualified to purchased.

Once he gives you this pre-approval you may now find a real estate agent to find yourself a home or he might have a referral.

Now make sure before you get your pre-approval you and your mortgage broker go over all your options as to the mortgage programs you qualify for, the interest rate, monthly payments.

If you are getting a FHA, fixed rate, two loans to eliminate PMI like an 80/20 or one loan, if you are qualified for and approved for a 100% loan.

You should select the loan that best suit your financial condition at the time. That could be an adjustable rate loan. It could be a fixed rate loan for 5 or 10 years and then adjust. Some adjustable rate mortgages only adjust once.

Make sure your mortgage broker explain all your options so you may make an intelligent decision.

What might be good for one person might not be good for you, in other words just because your friends and all your real estate buddies are telling you about the great fixed rate they got, your financial situation might call for something else.

So select the best option for you and your financial situation.

You should also get a Good Faith Estimate (GFE) which will indicate the cost you will have to pay for getting this loan. It will also indicate the amount of your down payment.

Once you have found a home the real estate agent will then prepare a contract for you and the seller to sign.

Your mortgage broker will now order an appraisal to show proof of the property value.

The mortgage broker might ask for additional information or documentation, don’t get all up tight this is normal, just supply the information or find the documents needed.

After the appraisal has been completed you will be called by your mortgage broker to sign your loan docs so you can take possession of your new home.

Before signing any loan docs make sure they say exactly what you and your mortgage broker went over when you decided on what mortgage program was best for you.

I hope this has been of some benefit to you, good luck

“FIGHT ON”

Steven asks…

Anyone know any banks still doing this kind of mortgage loan…?

Applying for a “combo” or “piggy back” loan – For example, you put 10% down, apply for one mortgage for 80% of the sale price and a second mortgage for 10% of the sale price. New York.

Please name banks that you know of still doing this to 90%

John answers:

All mortgage loans are not created equal. If you are looking for a loan, you have probably discovered the array of loan types and options. It can be confusingand are easier to qualify for than conventional loans. They are also guaranteed to the lender, which allows the borrower to obtain more favorable loan terms.

Michael asks…

Reverse Mortgage?

Those of you that HAVE a reverse mortgage or have THOROUGHLY INVESTIGATED its ramifications, please tell us what your experience has been or the merits/shortcomings of them.

John answers:

A reverse mortgage is a type of loan available to seniors (62 and over in the US), used as a way of converting their home equity (the value of the home, minus the amount of any existing mortgages) into one or more cash payments while retaining ownership of the property (continuing to live there) and avoiding monthly payments. Repayment of the loan is deferred until the borrower is no longer living in the home.

In a typical mortgage, a home owner pays a monthly amortized amount; after each payment, the owner has more equity in the house. After a certain amount of time, the mortgage will be paid in full and the property released from the debt. In a reverse mortgage, the home owner pays nothing each month and all interest on the debt is added to the lien on the property. If the owner receives monthly payments, then the debt on the house increases each month.

If a house gains significantly in value after a reverse mortgage is taken on it, it is possible to get a second and even third reverse mortgage to borrow against the increased equity that the owner now has in the more valuable house. But, in the United States a reverse mortgage must be the first and only mortgage on the property (if there is an existing mortgage, it will be paid off with some of the proceeds from the reverse mortage). In the United States, if the property increases in value (and as the mortgagee ages and qualifies for more money), the reverse mortgage may be refinanced to borrow more against the increased equity.

Reverse mortgages in the United States

Requirements
To qualify for a reverse mortgage in the United States, the borrower must be at least 62. The borrower must pay off any existing mortgage(s) with the proceeds from the reverse mortgage and, if needed, additional personal funds. There are no minimum income or credit requirements, and for most reverse mortgages, the money can be used for any purpose. A pending bankruptcy that has not been finalized may, however, slow the process. Some types of dwellings, such as lower-value mobile homes, do not qualify. Before borrowing, applicants must seek HUD approved counseling[1]. The counseling is a free safeguard for the borrower and his/her family, to make sure they completely understand what a Reverse Mortgage is, and what the process of obtaining one is.

Reverse mortgages are offered by some state and local governments. These “public sector” loans generally must be used for specific purposes, such as paying for home repairs or property taxes.[2]

The majority of reverse mortgages are FHA insured.

Payment(s) (loan advances)
The amount of money that an individual homeowner can receive from a reverse mortgage depends on their age, the Federal Housing Administration (FHA) or Fannie Mae (FNMA) appraised value of the home, and the starting interest rate (effective upon closing/finalization of the loan). The location of the home may also have an impact. There is also a type of reverse mortgage for homes valued over the maximum Fannie Mae limit. These are called “cash” accounts, and are proprietary loan products.

In a reverse mortgage in the U.S., a borrower can be paid in a lump sum, monthly (payment of advances), through an increasing line of credit, or a combination of all three. The money received (loan advances) are not taxable and do not affect Social Security or Medicare benefits.

An American Bar Association guide explains that if you receive Medicaid, SSI, or other public benefits, loan advances will be counted as “liquid assets” if the money is kept in an account (savings, checking, etc.) past the end of the calendar month in which it is received. The borrower could then lose eligibility for such public programs if their total liquid assets (cash, generally) is then greater than those programs allow.

Costs
The cost of getting a reverse mortgage from a private sector lender exceeds the costs of other types of mortgage loans from such a lender. There is an insurance premium of 2 percent of the loan and a 2 percent origination fee in addition to normal closing cost. Thus a $200,000 loan would have $8,000 in costs beyond the normal closing costs, which are typically some thousands of dollars. In addition, there is a monthly service charge of $30 that is usually added to the total amount of the loan.

The lowest cost reverse mortgages are offered by state and local governments. They generally have low or no loan fees, and the interest rates are typically low or moderate as well. But, as noted above, they often have many restrictions, and many states don’t have such programs at all.

When the loan ends
The loan ends when the homeowner dies, sells the house, or moves out of the house for 12 consecutive months or more (for example, to go into an assisted living home). At that point, the reverse mortgage can be paid off by the proceeds of the sale of the house, or refinanced by the heirs of the homeowner’s estate. If the proceeds exceed the loan amount, the owner of the house (if moving out or selling) receives the difference; if the owner has died, the heirs receive the difference. For cases where the proceeds are not sufficient to pay off the loan, then the bank (or insurance that the bank has, on the loan) makes up the difference.

The technical term for this cap on debt is “non-recourse limit.” It means that the lender does not have legal recourse to anything other than the value of the home when the loan is to be paid off.

Volume of loans
The most popular type of reverse mortgage in the U.S. Is the FHA-insured Home Equity Conversion Mortgage (HECM) which accounts for 90% of all reverse mortgages originated in the U.S. As of December 31, 2005 a total of 195,418 HECM loans had been issued since the program’s inception in 1989. However, program growth in recent years has been very rapid. The National Reverse Mortgage Lenders Association (NRMLA) reports that 55,659 HECM loans were endorsed thru the first nine months of fiscal year 2006, an 83 percent increase over the 30,404 loans endorsed during the same period in the prior fiscal year.

Section 255 of the National Housing Act, which governs the HECM program, limits the aggregate number of outstanding HECMs to 250,000. Conceivably, the cap could be reached in the next 12-24 months. Efforts are currently underway to remove or expand the cap on the number of HECM loans that can be issued.

Other Options
The biggest drawback with reverse mortgages are the high upfront costs. Some seniors may want to consider other options to tap their home equity, particularly if they do not think they will remain in the home for at least five years.

For example, a home equity line of credit (HELOC) requiring interest-only payments for 10 years can be used. These loans typically have very low (or zero) upfront costs. The drawback is that, unlike a reverse mortgage, the borrower must make a monthly (interest-only) payment to the lender. These payments can be made for several years by drawing on the line of credit itself. Of course, the balance needs to be paid off when the house is sold or the owner dies – just as with a reverse mortgage.

Other options that can free up home equity but avoid the high upfront costs of a reverse mortgage include: 1) intra-family loan or sale-leaseback and, 2) selling and moving to a less expensive dwelling or location. However, when selling the homeowner incurs high closing costs including, typically, a 6% commission, moving costs, and purchase costs on the new dwelling. Currently, there is a coordinated government program called “Aging in Place” that strives to assist the homeowner in staying in their home and neighborhood, if that is their desire. Various studies, including AARP, show that over 80% of elderly homeowners do not want to move.

John asks…

Mortgage Qualification?

My wife and I were granted a bankruptcy in June 2005 before the new laws were in effect. We had a lot of medical bills as well as over $8000 in credit card bills. We continued to pay our car loans and student loans. In the fall of 2006 we relocated and both got much higher paying jobs. We have paid off one car, re-established credit and currently have only about $1200 in credit card bills (mostly veterinary bills and equipment I needed for work.%
I got cut off somehow. We make a combined $75K annually and have no problem paying our bills. We have had both of our jobs for 2 years now.

Before I go to the bank, I was just wondering what others think of out chances of getting a mortgage.
When we filed neither of us had the jobs we have now and were only making around 40K combined.

The major credit card balance is vet bills we put on last month because of a sick dog and a store card has a recent purchase of new equipment I use for work…like I bought it two weeks ago and have a 6-month same-as-cash deal with supplier.

John answers:

Having your bankruptcy in 2005 will cause you to have to write a letter of explanation as to why you filed for the bankruptcy. I think your chances of getting a mortgage loan is very good.

In order to find out the type of loan programs you are qualified for you will have to fill out a loan application, with a mortgage broker, which you can find one in your local telephone book.

Make sure this mortgage broker or mortgage banker is able to do government loans such as FHA and VA loans if you qualify for one.

He will fill out this application, which takes awhile so grab your favorite beverage and sit down. Once you have completed the application, he will run your credit report which will have your credit scores. These credit scores will determine your interest rate.

The amount of your monthly debt payments you are required to pay as per your credit report and the amount of mortgage you can take on based on your income will determine the amount of house you will be able to purchase.

When you speak with the mortgage broker you will need the following documents to complete the loan application, there will be others, but this will get you started.

#1 One month of pay stubs for each person that will be on the mortgage.

#2 Six months bank statements from each bank in which you bank as well as statements from any 401K from you place of employment.

#3 Two years of federal income tax along with the W-2 that match.

Once he has all that he need to do he can then issue you a pre-approval letter so you can purchase a home. In this pre-approval letter will be the amount of house you are qualified to purchased.

Once he gives you this pre-approval you may now find a real estate agent to find yourself a home or he might have a referral.

Now make sure before you get your pre-approval you and your mortgage broker go over all your options as to the mortgage programs you qualify for, the interest rate, monthly payments.

If you are getting a FHA, fixed rate, two loans to eliminate PMI like an 80/20 or one loan, if you are qualified for and approved for a 100% loan.

You should select the loan that best suit your financial condition at the time. That could be an adjustable rate loan. It could be a fixed rate loan for 5 or 10 years and then adjust. Some adjustable rate mortgages only adjust once.

Make sure your mortgage broker explain all your options so you may make an intelligent decision.

What might be good for one person might not be good for you, in other words just because your friends and all your real estate buddies are telling you about the great fixed rate they got, your financial situation might call for something else.

So select the best option for you and your financial situation.

You should also get a Good Faith Estimate (GFE) which will indicate the cost you will have to pay for getting this loan. It will also indicate the amount of your down payment.

Once you have found a home the real estate agent will then prepare a contract for you and the seller to sign.

Your mortgage broker will now order an appraisal to show proof of the property value.

The mortgage broker might ask for additional information or documentation, don’t get all up tight this is normal, just supply the information or find the documents needed.

After the appraisal has been completed you will be called by your mortgage broker to sign your loan docs so you can take possession of your new home.

Before signing any loan docs make sure they say exactly what you and your mortgage broker went over when you decided on what mortgage program was best for you.

I hope this has been of some use to you, good luck

“FIGHT ON”

Daniel asks…

Which banks offer the USDA mortgage loan?

Since the government has opened again, I’m trying to find a bank that has this program. Seems like the big ones don’t. The site isn’t open yet on the USDA website.
I’m in Ohio.

John answers:

Most mortgage lenders offer this government mortgage loan program. You would need to inquire of a mortgage lender if they are authorized to do government mortgage loans such as VA. FHA and USDA mortgage loans.

Bank of American and Wells Fargo offer these type mortgage loans.

I hope this has been of some benefit to you, good luck.

“FIGHT ON”

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