Should you consider an adjustable-rate mortgage? - MSN Real Estate

Should you consider an adjustable-rate mortgage? - MSN Real Estate

5 ways to refinance with bad credit

Mortgage lenders, whether or not they offer bad-credit mortgage refinancing, review your credit, your home equity, and your debt-to-income ratio to determine whether they can approve a new home loan. While you likely know if you have credit problems or debt problems, you need to start the home refinance process by checking with a lender to find out your credit score.

Lenders have varied standards of risk tolerance; so while one lender may turn you down, another may be willing to offer a bad credit refinance.

Try these options for bad-credit refinancing:

Ask about FHA refinancing. One of the few options available for borrowers with a credit score in the 620 to 640 range is FHA refinancing. FHA loans, which are government-insured, are designed to help borrowers with a lower income or with some credit challenges. Lenders are sometimes more lenient with these loans because they know government funds will kick in if they must foreclose on the loan. While FHA rules say you can have a credit score as low as 580, few lenders will approve a loan for borrowers with a credit score under 620. Be aware that FHA loans require mortgage insurance which could make your monthly payments higher than you want.

Pay down some debt. If you have some cash available, you should pay off some of your credit card debt. Not only will this boost your credit score, but it will also improve your debt-to-income ratio since your monthly credit obligations will be lower.

Improve your credit. There are no legitimate quick fixes for your credit; but if you begin paying your bills on time and reducing your debt, you can eventually fix your credit problems.

Increase your home equity. Home values depend on a variety of factors; but if you have some cash that you can use to pay down your mortgage balance, you will look like a better risk to a lender. Paying off your credit card debt should be your first priority; but if you have done that and have a lingering bad credit score, you can improve your chances of a loan approval if your mortgage balance is lower.

Increase your income. It's not always easy; but if you can bring in extra money with a second job or overtime, you can use this cash to pay off your debt or some of your mortgage.

4 problems that could ruin your mortgage - MSN Real Estate

4 problems that could ruin your mortgage - MSN Real Estate

10 Major Mortgage Mistakes

Getting a mortgage is no simple task: It's a complex and time-consuming process, and perhaps one of the most significant events of our lives, at least in financial terms. Here are ten potential pitfalls to avoid:

More from USNews.com: • 50 Ways to Improve Your Finances in 2011 • 12 Money Mistakes Almost Everyone Makes • 10 New Money Tools For Young Adults

1. Not checking your credit: Long before you begin searching for a mortgage, you should know where you stand in the credit score department. After all, a bad credit score can bump up your mortgage interest rate several percentage points or leave you with no approval at all. Be sure you check your credit early on (several months in advance) in case any changes need to be made to get it back up to snuff.

[Click here to check home loan rates in your area.]

2. Applying for new credit alongside the mortgage: In this same vein, be sure to avoid applying for any other type of credit before and during the mortgage application process. Whenever you apply for new credit, you're seen as a greater credit risk, at least initially. If you happen to apply for a credit card or auto loan around the same time you apply for a mortgage, your credit score might get dinged enough to kill your eligibility or bump up your interest rate.

3. Failing to look at the total housing payment: A mortgage payment consists of principal, interest, taxes, and insurance (PITI). A common mistake made by prospective home buyers is not factoring in their property taxes and insurance premium into their overall mortgage budget. The debt-to-income ratio (DTI ratio), used to determine if a borrower will qualify for a certain mortgage payment, is calculated by dividing the proposed cost of PITI by gross monthly income. A $1,200 homeowner's insurance policy would add $100 per month to an escrowed mortgage payment.

4. Not seasoning your assets: The bank or lender will want to see that you can actually pay your mortgage each month. But without seasoned assets, those that have been in your own account for at least a couple months, you could be out of luck entirely. Some borrowers seem to think they can transfer funds from a relative's account days before applying, but this simply won't fly once the underwriter uncovers the paper trail.

5. Job hopping: Another key to mortgage approval is steady employment and income. An underwriter will want to know that the income you bring in every month is consistent and expected to continue into the foreseeable future. So don't jump from job to job too much before applying for a mortgage. If it's in the same field, it shouldn't be a deal killer, but a career change will lead to problems. If you're thinking about jumping ship, wait until you've closed your mortgage first.

6. Not getting pre-approved: Good preparation is the key to a good mortgage. Before shopping for a home, make sure you can actually qualify for financing by getting a pre-approval. A mortgage pre-approval is more robust than a simple pre-qualification because the bank pulls your credit and looks at your income, assets, and employment. Your DTI ratio will also come into play to ensure you know exactly how much you can afford. With this pre-approval, you will also get a written commitment from the lender that will show home sellers you're serious about the purchase.

7. Not shopping around: But just because you're pre-approved with one bank doesn't mean you need to obtain financing from them. Be sure to shop around with multiple banks and lenders and even consider a mortgage broker. A broker can shop your rate with a number of banks concurrently and find you the lowest rate with the best terms. Don't be one of the many consumers who obtains a single mortgage rate prior to applying. Comparison shop as you would for anything else you buy. And don't forget to factor in closing costs!

8. Chasing exotic loan programs: Shop around for the lowest rate and closing costs, but not at the expense of your mortgage. Anything that sounds too good to be true most likely is. If the payment seems too low, you might be paying interest-only or even negatively amortizing, meaning your mortgage balance is growing each month. It's best to keep it simple and go with a loan program you can get your head around, like a fixed-rate mortgage.

9. Forgetting to lock your rate: Keep in mind that a mortgage rate means very little if it's not locked-in. If you're happy with your rate, lock it. Mortgage rates change daily and sometimes several times daily. All those mortgage quotes you obtain are just quotes until you actually tell the bank, lender, or broker to "lock it in." Once locked, your rate is guaranteed for a certain period of time, be it 7 days, 15 days, or a month. But never assume your rate is locked until you get it in writing!

10. Not reading your loan documents: Finally, it's your responsibility to read and accept the terms of your new mortgage. Sure, it might be a pain to go through all the loan documents at signing, but it's a bigger pain to sign up for something you don't want or agree with. Take the time at closing to ensure you understand everything you're signing, and thereby agreeing to. And don't be afraid to ask questions! Otherwise, you could wind up with a mortgage with predatory terms and no place to turn.

Colin Robertson is the author of several finance websites aimed at helping consumers save money, including The Truth About Mortgage and The Truth About Credit Cards, which includes his popular credit score range.

Should you consider an adjustable-rate mortgage? - MSN Real Estate

Should you consider an adjustable-rate mortgage? - MSN Real Estate

Market Commentary

Updated on July 26, 2013 10:45:42 AM EDT OpenClose Mortgage Software Friday’s bond market has opened up slightly with stocks showing noticeable losses. The major stock indexes are well in negative territory during early trading. The Dow is currently down 94 points while the Nasdaq has lost 10 points. The bond market is currently up 3/32, but afternoon strength yesterday should improve this morning’s mortgage rates by approximately .125 - .250 of a discount point. Yesterday’s 7-year Treasury Note auction went a little better than Wednesday’s 5-year Note sale. That news didn’t cause bonds to rally late yesterday, but it did contribute to them erasing their morning losses and moving into positive ground before closing. The rebound from yesterday and this morning’s gains have pushed the yield on the benchmark 10-year Treasury Note down to 2.56%. Unfortunately, as long as it is above 2.50% it is my opinion that the risk of mortgage rates moving upward still remains high. Therefore, please proceed cautiously if still floating an interest rate and closing in the near future. There was one piece of economic data posted late this morning. The University of Michigan revised their Index of Consumer Sentiment for July just before 10:00 AM ET. They announced a reading of 85.1 that was its highest level in six years, indicating that surveyed consumers were more optimistic about their own financial situations than many had expected. Analysts were calling for a reading of 84.1, which was a slight increase from the preliminary estimate of 83.9 announced earlier this month. Because rising confidence in consumers usually means they are more apt to make a large purchase in the near future that fuels economic growth, we should consider this data negative for the bond market and mortgage rates. However, as expected, the news hasn’t had much of an influence on this morning’s trading or mortgage pricing. Next week is extremely busy in terms of important economic data and other events that are likely to affect bond trading and mortgage rates. I show seven economic reports currently scheduled to be posted next week, including the initial Gross Domestic Product (GDP) reading for the second quarter, ISM manufacturing index and the monthly Employment report. In addition, we also have another FOMC meeting that will probably cause more volatility in the markets. The mortgage relevant events don’t start until Tuesday morning, so expect any weekend news and last minute portfolio adjustments ahead of the week’s calendar to drive bond trading and mortgage pricing Monday. Look for details on next week’s events in Sunday’s weekly preview. Tomorrow’s only relevant economic data is the revised reading to July's University of Michigan Index of Consumer Sentiment just before 10:00 AM ET. This index will help us measure consumer optimism about their own financial situations and is considered relevant because rising consumer confidence usually translates into higher levels of spending, which adds fuel to the economic recovery and is looked at as bad news for bonds. Tomorrow’s release is an update to the preliminary reading we saw two weeks ago, so unless we see a drastic revision to the preliminary estimate of 83.9, I think the markets will probably shrug this news off. ©Mortgage Commentary 2013

Lose that Mortgage Insurance

  Many people have mortgage insurance which is unnecessary now. Sibley Mortgage Group is now offering mortgages with no mortgage insurance (MI) with loan to values up to 97%. For people that purchased or refinanced in the past few years this is a great time to refinance. It's possible to lose the MI even if your loan to value is over 80%.

Call 321-689-0089 or email jay@sibleymortgage.com