Lenders use three criteria to decide whether or not to approve a mortgage application. Borrowers must meet minimum standards for credit scores, loan-to-value ratios (LTVs) and debt-to-income ratios (DTIs) in order to be approved. Minimum standards vary by the type of mortgage in which you are applying for and by the lender.
Over the past three years, mortgage lenders have been slowly loosening their standards for mortgages. Understanding the reasons for this trend and the differences among different loan types will help today’s borrowers understand their options.Credit scores, LTVs, and DTIs
The most widely discussed lending standards are FICO scores, the credit [...]
The term “mortgage” is a 13th century Middle English word imported from Anglo-French: “mort” is French for death, and “gage” means pledge in Latin. In early Anglo-Norman law, property pledged as security for a loan was usually held by the creditor who could farm it and sell the proceeds — a sneaky form of interest in an era when lending for profit was considered a form of sinful usury. When the debtor finally couldn’t stand watching his wealthy creditor get even richer off his mortgaged land, he found a way to pay off the debt. If he couldn’t find the cash by the time he died, the land would become the creditor’s. Hence the name [...]
It’s understandable why borrowers think that the best way to get a lower mortgage rate is to pick a lender who advertises the lowest rate. Mortgage companies know that, and they try to differentiate themselves from competitors by advertising the lowest possible rate they can offer the most qualified borrower.
Comparing the rates lenders advertise does not mean the one advertising the lowest rate will be best for you. What most borrowers don’t realize is that they have the power to lower their mortgage rates.Lower risk means a lower rate
Many factors determine an individual borrower’s mortgage interest rate. Lenders are in the business of managing [...]
Retirees are the wealthiest demographic in America. More than 60 percent of households headed by people over 65 have assets worth at least six figures and more than 10 percent are into the seven figures. Many aging workers fear they can’t buy a home after they retire because they will be living on a fixed income. Some downsize before they are ready, selling the home they have lived in for many years and rushing the decision to buy a retirement home while they are still bringing home paychecks.
Qualifying for a mortgage after retirement is a little different than it is for buyers who are employed full-time. Retirees need to demonstrate to lenders that they can access [...]
Adjustable rate mortgages are mortgages where the interest rate changes during the life of the loan. The most popular structure consists of a short period where the rate is fixed and attractively low−sometimes much as a full percentage point below comparable fixed-rate mortgages. At a date in the future − usually five to ten years − the interest rate resets. Often rates are linked to an index, like the prime rate, or the S&P 500, and after the reset, rates are usually significantly higher.
Adjustable-rate mortgages, or ARMs, were popular during the housing boom twelve years ago. Lenders created a variety of ARM structures to meet the demands of a buying public that had [...]
Mortgage rates are always changing. They go up; they go down. For a 30-year fixed rate mortgage, rates peaked in 1981 at 18.63%, unheard of in today’s era of low-interest rates. Mortgage rates bottomed out in 2012 at 3.31%, according to Freddie Mac’s Primary Mortgage Market Survey.
If you’re buying a home, you need to pay close attention to mortgage rates. They have a significant impact on the cost of buying a home. As the rates increase, your monthly payments go up. When rates go down, the cost of a home declines. For 2018, experts are predicting rates will increase.What influences mortgage rates?
A variety of factors influence mortgages. They can [...]
Mortgage interest rates are tied to the Federal Funds Rate, which is the interest rate that banks charge each other to borrow money. In turn, the FFR is directly influenced by the Federal Reserve.What’s a Rate Lock?
Simply put, a mortgage rate lock is a legal agreement in which a lender promises to reserve a fixed interest rate at a fixed number of points for a specified time period. If you don’t lock in your rate soon after your offer is accepted then you’ll be subject to whatever fluctuations influence mortgage interest rates until the day you actually close, and those fluctuations can be costly.When to [...]
If you’ve spent any time researching the costs associated with homeownership, then you’re probably already familiar with private mortgage insurance, also known as PMI. Still, it’s a good idea to know exactly what you’re getting yourself into. With that in mind, we’ll discuss the finer points of the mortgage insurance concept.Mortgage Insurance Protects the Lender
Normally, when you purchase an insurance policy, it’s designed to protect you. But that’s not how mortgage insurance works; its purpose is to protect your lender. When a bank or other lender grants a mortgage, that entity is taking a [...]
No matter how many times you’ve purchased a home, the escrow process can still be a source of confusion. If you’re buying your first home, this is doubly so. So what exactly is escrow and how does it work?
There’s a lot at stake during a real estate transaction and there’s plenty of room for error. That’s where escrow agents come in. You can think of an escrow agent as an impartial third party who takes possession of important documents and funds for safe keeping while the closing process is in progress. After you have closed on your house the money that you pay to your escrow each month will go towards your property taxes and [...]
Although the process might seem daunting to many first-time homebuyers, the information in this article should go a long way towards making the mortgage application process smooth sailing for anyone. Applying for a mortgage is actually a lot like applying for college: make just a few key mistakes, and you could be “out of the game.” Here are six of the most common pitfalls that people make when applying for a mortgage – and how to avoid them!1. Bad Credit
It simply cannot be understated: the health of your credit score is extremely important and greatly affects your mortgage application chances. The [...]
When it comes to paying off mortgages, conventional wisdom holds that you should do it as quickly as possible, but conventional wisdom isn’t always correct. In fact, there are specific advantages to carrying a mortgage on your home for as long as possible. In this article, we’ll examine the many benefits of having a mortgage, and discuss why it doesn’t always make sense to pay off the remaining balance in a hurry.Mortgage Debt Is Low Interest
A mortgage is one of the most affordable means of borrowing money that you will ever encounter, unless you receive a zero-interest loan from a wealthy [...]
Gone are the days when mortgage lenders approved practically every application that rolled across their desks. Ever since the housing bubble burst, getting approved for a mortgage has become increasingly difficult. For a while, even buyers with good credit couldn’t get approved. Thankfully, things are finally starting to loosen up, but it’s still hard for an individual with average credit to get approved for the mortgage they want. For these buyers, a cosigner may be able to help get their loan application approved. But is using a cosigner a good idea? For some, it is; for others, not so much. [...]