Zero Down Mortgage – Tips On Getting Approved
Zero down home financing is about getting rid of the obstacle of closing costs. You can trade in your rent payment for a house payment without paying thousands at closing. Before you start enjoying the benefits of home ownership, make sure you follow these tips to get approved for the best rates.
Check Your Credit Report
Annually checking your credit report is a good idea, especially if you are applying for new credit. Make sure that all your information is correct. If there are mistakes, get them fixed. Otherwise, you could be paying thousands in interest charges.
While looking at your accounts, keep your debt to a minimum. A high debt to income ratio can disqualify your for a zero down loan. Also make sure the debt you do have is spread over multiple accounts rather than maxing out one account.
Increase Your Cash Reserves
Cash reserves settle lenders nerves. So you might consider liquidating stocks or other assets when applying for a mortgage. At a minimum, lenders like to see at least two months worth of payments as liquid assets. You do have the option of reinvesting those funds after the loan has been completed.
Look For The Right Lender
Not all lenders will look at your application in the same way. Each company has their own lending criteria. So start your search by requesting loan estimates from several financial institutions. You can start with a mortgage broker site or go directly to the lender.
There are several definitions of zero down home financing. It could mean no down payment or a rolled in closing costs. There are even home loans with no closing costs. Check loan quotes and their fine print to find the financing that best meets your financial goals.
Always Other Options
There are other options to avoid a down payment. One option is to get two mortgages to finance your homes purchase. The other option is to put money down, but then turn around and take out a home equity loan. This option usually helps you avoid paying PMI.
Dont rush into any mortgage. Research the numbers and choose what works best for you and your budget.
What is an Interest Only Mortgage
The CML (Council of Mortgage Lenders) show that nearly 6 Million people have received mortgages that are interest only. Interest only mortgages means that your monthly payments are applied only to the interest accrued on the debt and not the actual debt itself. Additionally, the CML has found that many first time home purchasers are seeking interest only mortgages. The number of first time buyers that apply for interest only loans increases each year. Why such a boom in this type of loan? Well research has found that by allowing first time homebuyers to pay interest only, is the only way many of them can afford to buy a home.
An example of how an interest only mortgage works is say a homebuyer wants to borrow 100,000 for three years at a fixed rate of 4.99%. The estimated payment for this person would be about 600 to repay the loan. However, if you make this interest only, their monthly payment would decrease to only around 400. The general problem with this type of mortgage is that the borrowing homeowner would need to have some way of being able to pay on the capital of the loan. Otherwise, at the end of the loan term they will still be left with the same debt.
Years ago, a mortgage lender would require that anyone applying for a loan be able to prove that they would be able to pay their loan. Today, it is simply the matter of reminding the homeowner that they will need to pay off the capital. Typically, it is usually required that those interested in a interest only loan have some sort of investment, for example and ISA (independent savings account) that will go towards the capital when the mortgage terms end.
It is extremely important that you thoroughly consider all your means and put a great deal of thought in how you can pay off the capital of the loan. Many people rely on house prices to rise to help them, with lower wages and falling prices this will not provide a secure environment. This in the end could mean trouble for the homebuyer.
So, by now you are probably wondering what you can do to pay this loan off. You could consider a mortgage of repayment, a portion of every monthly payment you make goes towards the actual debt. This is more expensive than the interest only loans; however, it does help reduce the debt by actually applying payments towards it. If you do have an interest only loan there are a few things you may be able to do. For example, you could have part of your mortgage switched into a repayment mortgage or open an ISA and start saving month every month. This is tax-free and by saving, you will bid up funds to put towards the capital.
What documents do I need in order to deduct mortgage
What documents do I need in order to deduct mortgage interest?
Many people are aware of how difficult it can be to perform normal tax processes when April comes around each year. On top of this, the more physical properties or complications an individual has in their life, the less simple it is for the individual's taxes to be filed, generally speaking - and this includes having a mortgage or residency.
Some individuals prefer to perform their own tax processes while other individuals prefer to enlist the aid or assistance of an individual who has been trained in filing taxes in the correct and proper manner. Regardless of how an individual chooses to perform their taxes, they need to have certain documents with them at the time of filing in order to ensure a smooth and quick filing of taxes. Each process needs its own paperwork, Schedules and Forms. Deducting mortgage interest on one's taxes is no different; this process requires its own Forms, Schedules and necessary or mandated documents in order to ensure that the mortgage interest is deducted correctly.
Individuals will need their own personal paperwork as well as certain forms as prescribed by the federal government and the Internal Revenue Service. Personal forms kept by the individual are necessary in order to complete the professional forms as directed by the IRS and the federal government. As a result, individuals need their personal paperwork in order to complete the government paperwork and submit mortgage interest deductions. Whether a person is filing their taxes on their own or relying on the help of others to file taxes, their personal paperwork needs to be accounted for and accessible in order to get the proper figures for the filing.
When it comes to personal paperwork, individuals who are deducting mortgage interest on their taxes will need to have on hand all of the paperwork that they have in relation to their mortgage. This includes the mortgage contract, since it specifies the time limit of the loan, the number of payments that will be made, the amount per payment, the total amount of the loan, the address of the mortgaged property, the individual(s) named on the mortgage and the amount of interest to be paid. All of these items are imperative in order to make sure that the individual's taxes get filed properly. Individuals will also need to have on had all of the payments that they have made for the year. Some individuals have paper documents and other individuals have electronic documents. While it is preferred by many to have paper documents, electronic documents are becoming more and more popular in this day and age.
When individuals are going to an assistance center for tax filing, most places will have the federal government documents on hand, as this is their job. However, some free assistance locations will not. If individuals are doing their own taxes or need to bring their own federal governmentIRS mortgage deduction tax paperwork, the forms necessary include the Form 1098, Schedule A. Individuals that need assistance from the IRS by way of their instruction forms can also benefit from acquiring Publication 936 and Instructions for Schedule A.
Types of Mortgages Available
Types of Loans
What types of loans are available to me? There are many different types of mortgage offered to consumers. Some of the most popular mortgage broker are the FHA Home Loan (Federal Housing Administration) and the VA Loan . Because the FHA mortgage and VA mortgage are guaranteed by the government, borrowers are able to make a smaller down payment, and take advantage of more relaxed credit and asset requirements than traditional conventional loans.. Details about the major types of loans, including FHA mortgage and VA mortgages, follow.
Conventional loans generally are considered loans with loan amounts at or under the maximum loan amount available for purchase by Freddie Mac or Mannie Mae.
Fannie Mae is the common name of the Federal National Mortgage Association. Fannie Mae is a congressional chartered, shareholder-owned company that buys mortgages from lenders and resells them as securities on the secondary home mortgage market. Before approving you, Fannie Mae looks at a number of factors including credit ratings, debt ratio, and employment history.
Freddie Mac Freddie Mac is the common name for the Federal Home Loan Mortgage Corporation. The 2006 maximum loan amount for both Fannie Mae Mortgage and Freddie Mac company is 417,000. Freddie Mac does not issue mortgages directly, rather, they buy mortgages from lenders and resell them as securities on the secondary mortgage market. Before approving you, Freddie Mac looks at a number of different factors including credit ratings, debt ratio, and employment history.
Government guaranteed loans. FHA, VA loans.
An FHA mortgage (Federal Housing Administration) has some advantages over conventional mortgage. Since FHA Mortgage are insured by the government, they generally have more lenient qualification and requirements, lower down-payment requirements, and they may be assumable. The maximum mortgage amount for an FHA mortgage varies depending on the city where you live. As your mortgage broker on what these maximum amounts are for your specific city. FHA loans are very popular with first time buyers. They also make great sense if you are buying a multi family property to live in and want to get maximum financing. Mortgage insurance on an FHA loan is the same no matter what loan to value your loan is, something that is not the case with a conventional loan. High LTV's pay a far greater insurance payment.
A VA (Veterans Affairs) mortgage carries many of the same advantages as an FHA home mortgage. However, to qualify for this mortgage, you must be a qualifying veteran, the unmarried widow of a veteran, or an active-duty serviceman. Talk with your mortgage broker on maximum loan limits, required down payments (if any) and what your funding fee will be. VA loans do not have a mortgage insurance payment, instead borrowers pay a one time fee for their "insurance" What percent of the loan amount varies, currently it will not exceed 4%. These are different than origination or discount points.
Non-Conforming Jumbo mortgage are loans where the loan amount is greater than the conforming loan limit. 359,650 currently for a single family. So if you need to borrow 500,000 to purchase your new home, it will be a jumbo loan. Jumbo loans typically have interest rates slightly higher than conforming loans, about 12 percent higher. If you will be borrowing this much money you should ask your broker if you could split up your loan into a 1st. and a 2nd. mortgage to avoid needing a jumbo loan and avoid the increase interest cost.
A mortgage broker can help you find the best rate and product to fit your situation. Ask them about what are your options.
The Reverse Mortgage-Fact & Fiction
Planning for retirement can be a daunting task, long-term care, investments or annuities, lack of retirement income. These all lead to unnecessary frustration. A reverse mortgage could settle some of that headache. Since most seniors will have need to reduce their current spending while retired, a reverse mortgage may provide the added cushion most people feel they need even before retiring. Social Security, IRA's, 401k's, and other methods of retirement income usually provide enough for living expenses and recreational activities, but do not leave much room to improve your financial future. A Reverse Mortgage is an increasingly popular solution to access a large amount of tax-free funds to safely allocate for higher interest investments and securities.
Reverse Mortgages are federally regulated and guaranteed financial vehicles that allow someone age 62 or older, to pull out equity locked in most senior's largest asset: their home. A Reverse Mortgage will provide a percentage of the home's appraised value, up to 60%, in a variety of different payout methods, but the borrower is not required to make a single payment as long as they continue to live in the home. All repayment, closing cost, and interest are repaid when the senior either moves or the home is sold, so it produces a large amount of capital with absolutely no risk of default or foreclosure on the home.
One of the key benefits to the reverse mortgage is that the funds are completely tax-free. A reverse mortgage will also not will NOT impact social security or Medicare benefits in any way. A reverse mortgage becomes even more impactful when used as a revenue generator by increasing your investment portfolio. For example, a couple who are both age 65, with a home value of 200,000, zero mortgage, and are looking to either purchase an immediate annuity or a joint long-term care insurance policy. A reverse mortgage could potentially provide over 100,000 to fund the annuity or a single premium insurance policy, with interest growth and a long-term care rider.
The true power of the reverse mortgage as an investment tool lies in two aspects of the product. The first is that any funds generated from a reverse mortgage are completely tax free, and will not affect the tax bracket of the applicant. The problem to the senior or anyone for that matter, is that they have to remove themselves from the asset they are liquidating in order to access the proceeds. Not with a reverse mortgage! A reverse mortgage is a true win win.
A reverse mortgage lets you unlock the value of your single largest asset without having to dispose of it or pay for it in any way. As more and more seniors reach their mid to upper 60s and 70s, they will look to increase the pounds available to them. Once again, this is why a reverse mortgage is going to continue to be a popular financial strategy in the years to come.
The Offset Mortgage Why Is It Growing In Popularity?
The Offset Mortgage Why Is It Growing In Popularity?
The biggest innovation in the mortgage market in recent years, the offset mortgage, is now starting to take a significant share of the market. Now, only six years after they were introduced, the offset and the current account mortgage account for 10% of all borrowed mortgage capital.
According to one of the UK's largest mortgage lenders, as many as 25% of existing mortgage holders could save money in the long run by choosing an offset mortgage. If you're one of those possible 25%, then it's important that you are aware of the facts.
What exactly is an offset mortgage?
Here's the concept: you borrow capital from the mortgage lender and you also have savings sat in another account. Instead of paying interest on your full loan and earning interest on your savings, you pay interest on the amount you borrowed minus the amount you have saved. For example, if you had 25,000 savings and a mortgage of 110,000, you would only pay interest on the sum total of debt, which would be 85,000. Your savings would not earn any interest on a separate level, they would only be linked to the mortgage.
So what's the big selling point?
The major advantage to this kind of mortgage, particularly where higher tax payers are concerned, is that you end up paying less interest. This transpires because you are not earning interest on the savings, and as you know, the taxman always takes a fair amount of that interest away from you. If you have significant savings, then you lose a lot to the taxman but not with the offset mortgage. That's why this type of mortgage is so well suited to people that have to pay over 40% tax.
These calculations illustrate the potential savings:
100,000 mortgage - 25 years
Interest rate - 4.69%
20,000 deposit
Traditional mortgage interest payments - 85,351
Offset mortgage interest payments - 41,998
Saving - 43,353
With the offset mortgage you would also complete the mortgage after just 19 years and 4 months. This is because the monthly repayments are calculated without your savings being included in the equation therefore you would overpay, and finish paying it off early.
On average, a standard rate tax payer could feasibly save 9,538 in tax and a higher rate taxpayer a considerable 17,341.
There's also the benefit of flexibility the offset is a lot more forgiving than the traditional mortgage and you can overpay, underpay and take payment holidays without penalties.
If it's that great, why isn't everyone doing it?
Offset mortgages used to have high interest rates, putting many borrowers off at the first hurdle. But as this type of mortgage has started to take off, lenders are offering better and more competitive interest rates.
The interest rate is however, still considerably higher than with the fixed rate mortgage for example, and it's important that anyone considering an offset mortgage can be sure that the tax savings will cover the higher interest charge. It's the kind of calculation that can only be accurately provided by a professional mortgage adviser.
As a rule, the standard taxpayer must have savings of 20,000 to put against a 100,000 mortgage to make the offset worthwhile. A higher rate taxpayer would only need 10,000 to justify this type of mortgage. (These calculations were made in reference to an average 4.69% fixed offset rate, and a 4.49% tracker mortgage.) These figures will obviously change with the potential rise and fall of interest rates, and as we project, offset and traditional mortgage rates move closer together.
The many variations on the offset mortgage
Mortgage lenders, in their bid to win your business, offer different incentives that they hope will give them the competitive edge. The most common incentive is a free property valuation or free legal work. The banks have a head start as they can include your current account in the offset calculation as well as your savings, but other lenders will let you offset two different savings accounts. Others will offer a borrowing facility and a chequebook.
The interest rate also varies considerably from a 6-12 month fixed rate, to a tracker guaranteed to stay below the base rate for 6 months, or a tracker which tracks the base rate for a set amount of years, but also charges a minimal premium.
The amount you are borrowing compared to the value of the property will also affect the interest rate. At the moment one lender will give an interest rate of 5.6% for people that are borrowing less than 50% of the property value, whereas anything above that (up to 99%) will have an interest rate of 6.45%.
The concept may be easy for you to get your head around, but the sums won't be. See an independent mortgage adviser for individual advice tailored to your circumstances, it's the only way to be sure that the offset is best for you. However, we think that if you have savings and pay interest at a higher rate, you'll be onto a winner with the offset.
*Indicative figures correct as at 1105
The Down Payment and Mortgage Relationship
Most people automatically look for the lowest down payment option on mortgages. This knee jerk reaction is not always the best way to go.
The Down Payment and Mortgage Relationship
A down payment is usually required when obtaining a mortgage. Although there are some down payment free mortgages available, these can generally tend to carry higher interest rates as well. When seeking to obtain the best terms, most options, and lowest interest rates, it is important to have some money set aside to make a down payment with. In general, the average down payment rate on mortgages currently varies from 0 to 20 percent of the mortgage value depending on the type of loan and if it is guaranteed.
Any time you are getting a loan, the more money you can put into it yourself the better off you will be later. The more money you have to borrow means that there will be greater amounts of interest that will have to be paid in the long run. Also, the more money you can put down on any loan, including a mortgage, generally will mean that the lender will be able to make a better offer with a better plan and a lower interest rate, saving you additional money in high interest costs.
When seeking the lowest interest rate possible, have at least twenty percent of the mortgage value on hand. By being able to put a 20 percent down payment on a mortgage, you will be able to save yourself a ton of money on private mortgage insurance and overall interest payments. You will also be able to secure a pretty sizeable portion of the homes equity for your own use. Obviously, equity is extremely important and the less money you put down on the mortgage, meaning more the bank supplies, also means that the bank will own more of the house and therefore more of the equity on the house. You will then have no options in the future when it comes to that equity and also will not be able to benefit from the increase in that equity.
So be prepared to have some money set aside when looking for a mortgage. For those with no other options, no down payment mortgages can easily be found, but just remember what you are sacrificing in the long run. Be smart and be prepared and seek out the best plan for you.