Feb
28
What is a second mortgage loan?
Filed Under Mortgage Loans | Leave a Comment
A second mortgage loan is based primarily upon these two conditions. A mortgage loan can be broadly understood as a kind of contract or a legal agreement, in which the borrower’s property is pledged as a security or collateral guarantee, and the borrowed amount or credit is generally repaid in small packets of predefined amount, which are also referred to as installments. As per the contract or the agreement, the buyer promises to repay the principal amount or the actual loan amount, and its interest, over a fixed period, also known as loan tenure in a regular and orderly manner. A lien is understood as a legal right or a claim imposed by the creditor or lender upon the property, against which the credit is taken or borrowed. In a simple language a lien means the creditor has a legal right to dispose off the debtor’s property, in case of defaults or the debtor’s inability to pay the loan installments.
A second mortgage is an additional mortgage loan, which is added to your first or original mortgage loan. Since the new mortgage loan is attached in conjunction to the first or original mortgage, it’s generally referred to as a second mortgage loan – second because it falls at number two position in relation to the main mortgage loan. This second mortgage loan has all the characteristics of its original or main loan. In short, you’ve a condition in which two mortgage loans remain side-by-side, each loan with its unique set or terms and conditions.
Why avail a second mortgage loan?
Now, if two loans are to share the same mortgage, i.e. the same security or collateral guarantee, what’s the need of going in for a second mortgage? The answer’s quite simple. When people go in for a mortgage loan, they understand the significance and the importance of a lien. Debtors know for sure, if they default, or end up with unforeseen circumstances and are unable to pay off their dues, the creditor holds a legal right to sell of the house offered as security and recover the dues. So individuals are very cautious about secured loans, and generally avail just enough credit to satisfy their requirements. As a result, the full potential of the lien is not utilized. It means if the property is worth $1,00,000/- a mortgage facility of $40,000/- or $50,000/- is generally availed against the security. The remaining potential is left unused. That’s where a second mortgage comes in. If the borrower desires additional cash, or has a need to finance some requirement, the unused potential left over from the first mortgage activity can be used for the additional mortgage. Due to this, the second mortgage is also referred to as a home equity loan. The two terminologies can be used in lieu of each other.
Advantages of a second mortgage loan
•The homeowners have to pay a smaller down payment, and in some cases, the down payment is totally avoided, to avail the additional credit. During the transaction, the homeowner has the option to break up the total loan amount into two separate loans referred to as a combo loan. The encumbrance or the risk factor is distributed between the two loans, allowing higher combined loan-to-values and a much lower blended interest rates.
•The additional funds can provide a homeowner with much needed cash to improve the quality of their home or pay off high-interest loans. The biggest advantage is it’s possible to avoid a refinance of the existing first mortgage.
•Second mortgage helps homeowners to avoid paying PMI, or private mortgage insurance. The resultant savings can be substantial depending upon the loan break down, and often saves the homeowner hundreds of dollars a month, in terms of additional expenses. If the first loan is kept at or below 80% loan-to-value, the additional PMI is not required to be paid.
•The monthly payments on the second mortgages are ideally low as compared to its first mortgage. The homeowners end up with a substantial amount of liquidity, which can be used to pay of existing loans or even finance a commercial project.
•The second mortgage is offered for both adjustable and fixed-rate options, so many options are available to choose from and to find the exact credit facility to fulfill your needs.
Feb
28
Modifying your Wells Fargo Mortgage through Obama’s Stimulus Package
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go is one of the most well known American banks. It is no surprise then that they are participating in the federal stimulus package and helping homeowners stay out of foreclosure and possible bankruptcy. You can now apply to Wells Fargo for a loan modification.
If your mortgage currently exceeds your home market value by at least 105% or if you have fallen behind on your loan payments you may qualify for federal assistance. This is what you need to know:
Depending on your unique situations, Wells Fargo offers a variety of programs through the federal stimulus package. These include: loan modification, extending the loan terms, short sale, obtaining a FHA loan claim or transferring your deed to Wells Fargo instead of losing your home in a foreclosure.
One key component of your application to Wells Fargo is a hardship letter. Your letter must explain fully why you are in financial hardship and what your plan is to maintain your new lower monthly loan payments after a loan modification. This letter is crucial and do not overlook it because you only get one chance to apply to the program.
Things you will need to submit with your application: why you are having financial hardship, your current loan terms and conditions, a detailed list of your current income and expenses, and a debt-to-income ratio.
It is also important to do your own research ahead of time and to be familiar with the different programs and options. This can show the bank that you are serious about getting back on the financial track.
Finanlly, you will only qualify if your mortgage value is 105% of your current home’s market value and it must be owned by Fannie Mae or Freddie Mac. After a loan modifciation, your monthly loan payments will not exceed 31% of your gross monthly income.
Feb
27
Home Mortgage Approval Procedure Completion: What You Should Know
Filed Under Home Mortgage | Leave a Comment
The first step you take in order to get a home mortgage is filling in the application at the loaner you prefer to deal with and the process of financing the purchase of the home you have ever dreamed of can take up to several months. There are a lot of different ways to complete the formal request including in the office of the banking institution, on the World Wide Web and even by electronic mail. Regardless of the way used to fill the application it is essential to maintain record of the application to allow the application to be followed up upon by the borrower.
What does a home mortgage application contain? There are different elements of the home mortgage application which are to be filled at the moment of application. Here they are:
Financial Resource Information
All financial information including net worth, assets, liabilities, debt and the credit rating of the borrower enter the home mortgage approval process. Basically, the financial worthiness of the applicant will be determined by the combination of all this information.
Employment Information
Professional situation information reporting how long the employee has been a part of the company, the income earned through a yearly or monthly basis and employment stability will also be analyzed at this time.
Funds Information
Funds which are being provided to guarantee the acquisition of the house are carefully studied in the home mortgage approval process. The aspects analyzed include the first deposit for the home mortgage funded from wages, financial resources and other investment accounts.
Property Value Information
An additional step of the home mortgage approval process is that the financial institution will study the value of properties and compare them to the purchase price of the house. It is an influential element of the home mortgage approval process as the future monetary worth of the home will be calculated by the loaner.
Once the application has been appraised by the bank, the bank will generally come up with a number based on the amount of the salaries combined with the credit history and worthiness to repay the debt for the total amount which the home buyer is approved for. This number will make the home buyer able to look for potential homes within the budget or price range that is determined by their affordability.
How much can you afford for a home mortgage?
Actually lending institutions recommend to spend no more than two and a half times – these quantities are often taken into account when the home mortgage enters the approval forces.
Aside from the cost of the monthly payment, a lot of other points are considered in the home mortgage approval process. Many expenses about which you did not worry before being homeowner, increase the expenditure of the owner. Fees associated with property taxes, homeowners insurance in addition to higher bills for public services that will come with ownership of the property. It is essential for the future homeowner to become aware that ownership can cost more than the monthly payment – the approval procedure can shed light on this issue for a lot of potential homeowners.
A lot of homeowners seek pre-approval as it can adjust the finances and accelerate the process of hunting for a home. Pre-approval can cut down the time that it takes to have the agreement of the lending company and simply quicken the entire procedure. It is advised that all consumers become pre-approved with their loaner to make the home mortgage application process more easy.