The Online Mortgage Blog

Should I Buy a House Now or Wait Until 2010 to Buy?

2009-03-02T13:57:00.000-08:00

Should I buy a house right now or wait until the market improves? This is a common question among first-time home buyers. And with so many negative news stories about the economy and housing market, it's easy to understand why. It can be downright scary to make a large purchase in a bad economy.

In truth, however, 2009 could be a great time to purchase a home. Of course, only you can decide whether to buy a house now or wait until later, but you should make a well-informed decision about it. So let's talk about some of the benefits of buying a house in the 2009 economy.

1. Low Prices

In many cities across the United States, home prices are at their lowest point in decades. It's bad news for homeowners, but it's good news for buyers. Nobody can predict how far they will continue to drop, or when we will hit the so-called "bottom" of the market, but your home buying dollar certainly goes a lot further right now!

2. Low Rates

Much like home prices, interest rates are also at their lowest point in decades. At the time of this publishing, a well-qualified borrower could qualify for a mortgage rate of 5% on a 30-year fixed loan. By most predictions they will stay below 6% for the remainder of 2009. Experts predict they will stay in the This is one of the first things I point to when somebody asks, Should I buy a house now or wait until later?

3. High Inventory

Because of the housing crisis, there are more homes on the market right now than there have been for quite a while. Drive around your neighborhood and you'll see what I mean. So in addition to the good deals you can get, you'll have a wide variety of properties to choose from. This is another good reason to buy now instead of waiting until 2010.

4. Tax Credits

If you buy a house before the end of the year, you'll qualify for a tax credit of up to $8,000. This is part of the government's stimulus plan to get people buying, and you can learn more about it in the Home Buying Institute's tax credit guide.

Should I purchase a home now or wait until later? It's a common question among first-time buyers right now. Here's the bottom line on this subject. If you can get qualified for a mortgage loan (good credit score, sufficient down payment, etc.), this could be a very good time to buy a house. You'll have many homes to choose from, you could save a lot of money, and you might even qualify to a tax credit. What else could you ask for?

Let me close by saying this. I'm not in the market for a new home right now. But if I was, I would certainly take advantage of the market conditions in 2009. I wouldn't wait until 2010 because I think prices are going to start rising then. Mortgage rates will probably be higher then too. So I would buy a house now instead of waiting. But that's just me.

I am Behind in Payments and Need Mortgage Help

2009-02-28T09:59:00.000-08:00

The U.S. housing market is in a sad state of affairs right now. Millions of homeowners in the U.S. fell behind on their mortgage payments in 2008, and many more will join those ranks in 2009 and beyond. So it's no mystery why so many people are seeking mortgage help right now.

But where do you go? What can you do? How can you get help when you've fallen behind on your mortgage payments, and what options do you have? That's what I'll address in this article.

Generally speaking, people who need help with their mortgage payments fall into one of two categories. If you're seeking help in this area, you can probably identify with one of the following scenarios:

Scenario 'A' - The homeowner has experienced a temporary financial setback, such as unexpected medical expenses or job loss. As a result, the homeowner falls behind on the monthly mortgage payments and needs help getting caught up. This is a short-term
Scenario 'B' - The homeowner simply cannot afford the home anymore. This may be because of an ARM loan adjusts to a higher rate, a recent job loss, the accumulation of other debts, or a combination of these things. This is a long-term predicament.

The question is, which of these categories do you fall into? If you are behind on your mortgage payments and looking for help, you must first determine whether you're in a short-term or long-term predicament. You can't find the best path forward until you start with this important distinction. So let's talk about the options people have when they fall into one of these scenarios.

If you are having short-term financial problems, and you feel you can get back on track with your payments, you should start talking to your mortgage lender (or whoever is servicing your loan at present). Most lenders will offer some kind of repayment plan to help you get caught up when you've fallen behind on payments. Specifically, you should ask them about reinstatement, repayment plans and forbearance. These are ways to get caught up on payments in lump sum or through future installments.

If you are having long-term financial problems, and you simply cannot afford the home anymore, then you will probably have to sell. Once again, you should talk to your lender about your options. In particular, you should ask if they would be willing to allow a short sale (where the home is sold for less than what you currently owe on it).

A home loan modification might be another option if you are behind in payments and need mortgage help. This topic has been in the news a lot lately, mainly because it's part of President Obama's economic recovery plan. The government is actually providing incentives to lenders and loan servicers who modify mortgages (to make them more affordable for struggling homeowners).

Conclusion and Going Forward

So, if you have fallen behind on your mortgage payments and need help of some kind, you should take the following steps. First, determine whether your payment problems are short- or long-term in nature. Next, talk to your lender and let them know where you stand. Research the options that are available to you, depending on your scenario. Learn everything you can about the most relevant solutions, and start talking to your lender early on. The worst thing you can do is nothing -- so get started today!

Totally Free Credit Score - No Such Thing

2009-02-17T13:55:00.000-08:00

There's a lot of confusion about the difference between credit reports and scores, where to find them online, and how to get a totally free credit score with no strings attached. So this blog post, I'll try to clear up some of the confusion that surrounds this subject.

First things first. Let's talk about the difference between reports and scores, since many people think they are one and the same.

A credit report is a record of your financial history. It includes information about your past and present credit accounts, loans, payment histories, collections (if any), and other related items. You have three different credit reports, one for each of the reporting bureaus -- TransUnion, Equifax and Experian.
A credit score is a numerical representation of your report. The FICO credit score is the one most commonly used by mortgage lenders, and it ranges from 300 - 850 (higher is better). You have three scores, one from each of the reporting bureaus, and they can all be slightly different.

Understanding the difference between these two things is the key to eliminating confusion. It will also help you understand why there's no such thing as a totally free credit score.

The Myth of Totally Free Credit Scores

In accordance with the Fair Credit Reporting Act (a federal law enforced by the FTC), you are entitled to one free credit report per year, from all three of the reporting bureaus mentioned earlier. You can do this once a year free of charge, and the best place to make your request is through the FTC-approved website at AnnualCreditReport.com.

However ... there is no federal law that entitles you to a totally free credit score. Remember, your score is different from your reports. Now, here's where things get a little confusing. But I'll do my best to keep it simple.

If you want to get a totally free credit report from Equifax, TransUnion and Experian, you can do that right now by visiting the AnnualCreditReport.com website. On the other hand, if you want to obtain your credit scores as well, you will have to pay for them in some way, shape or form.

On some webites, you will see an advertisement for "3 Free Credit Reports and Scores." But this will always be followed by an asterisk and a disclaimer of some sort. Usually, you have to sign up for some kind of credit monitoring service / identity theft protection. You'll have to pay a monthly fee for this service, but you can cancel it anytime. So you can see that it's not a totally free credit score because you've had to sign up for something in order to get it.

You can also purchase your credit scores directly from the reporting bureaus mentioned above, without signing up for any kind of monthly service. You can request it through the MyFICO.com website as well. You will probably pay between $15 and $30 for a single credit score, depending on where you get it.

So let's sum up what we've discussed so far:

Your credit reports and scores are two different things.
Federal law entitles you to one free credit report per year, from all three bureaus.
There really is no such thing as a totally free credit score with no other purchase required.
You can buy your scores individually or in conjunction with a monitoring service.
Either way, you're going to pay for the score in some fashion. So it's not totally free.

In closing, I'd like to make an important point on this subject.

It's Still Worth the Money

I'm not saying all of this to dissuade you from purchasing your credit scores. On the contrary, I encourage you review your scores before applying for a mortgage loan. I just want you to understand how the process works. My goal with this article is to help you navigate your way through all of the marketing hoopla to get what you're after.

So even though you can't find a totally free FICO score online, it's still worth the money. You can sure that a mortgage lender is going to review this information when considering you for a loan, so you should preempt that by reviewing your own credit situation -- before applying for a loan. You also need to know where you stand, in terms of your score. If it's low, you should focus on improving your credit so you can get qualified for a good loan with a decent interest rate.

I hope this article helps you understand the world of consumer credit and how all of these things tie together. If you'd like to learn more about this topic, check out the credit section of the main website.

Real Estate Purchase Agreements Online

2009-02-11T14:17:00.000-08:00

These days, you can find just about any type of real estate form online. In some cases, you can even get them for free. The same goes for the real estate purchase agreement forms needed when buying a home. So in this blog post, I thought I'd take a break from writing about mortgage loans in order to share a list of useful websites.

Here are some of the places online where you can find free and low-cost purchase agreement forms, as well as other real estate paperwork. Please note that the legal requirements for purchase agreements vary from one state to the next. So before buying a real estate form online, you'll need to do some research to see what your state requires.

Find Purchase Agreements Online

I am not endorsing any of the websites below, but simply presenting them for your consideration (and to save you some time).

http://www.ilrg.com/forms/realestate-purchase.html
http://www.lawdepot.com/contracts/real-estate-purchase-agreement/
http://www.lectlaw.com/formb.htm
http://www.alllaw.com/forms/real_estate/assignment_of_real_estate/
http://www.totalrealestatesolutions.com/realestateforms
http://www.legalwiz.com/free-forms
http://www.urgentbusinessforms.com/purchase_agreement.asp

LegalZoom.com is another website worth checking out. They have a variety of other legal forms available for online purchase. They have some real estate items, but at the time of this article they did not have any purchase agreement forms available. They might be helpful in other real estate areas though.

The real estate purchase agreement is a pretty standard document, across the board. But there are some light variations from state to state. You can probably find information about your particular state's legal requirements on the official website.

Mortgage Interest Rate Predictions for 2009

2009-02-06T15:17:00.000-08:00

What will the economy do in 2009? How far will the housing market recover? What kind of mortgage rates will be offered? These are some of the most common questions among home buyers right now, and with good reason.

In this article, I've compiled a list of mortgage interest rate predictions given by a variety of experts. Most of the predictions given below are specific to the 30-year fixed mortgage.

Mortgage Rate Predictions - What the Experts Say

I'll start with my own interest predictions, based on what I've seen the federal government do over the last few weeks. I would predict that the rates for fixed mortgages will hover in the 5.25% - 5.75% range for most of 2009. My prediction for adjustable-rate mortgages is a quarter of a point below that (depending on the type of ARM loan).

U.S. News
The interest rate predictions offered in this article on the U.S. News website are less optimistic than my own. Quoting the 2009 mortgage predictions given by HSH, the article predicts that rates on 30-year fixed mortgages will exceed 6% by the end of the year.

New York Times
This article on the New York Times website quotes the interest rate predictions given by the economic forecasting guru from the Mortgage Bankers Association. She said they expect to rates of 5% or slightly higher through most of 2009.

Business Week
This article by Business Week quotes sources from Freddie Mac, who predict that mortgage rates will remain relatively flat throughout 2009. They expect to see a hovering between 5% and 5.25% for most of the year. It's worth noting that Freddie Mac has a lot of influence over the rates being offered by mortgage lenders, because they buy loans from those lenders.

Not Everyone Gets the Best Rates

Keep in mind that these rate predictions pertain to best-case scenarios. Just because a lender offers a rate of 5.25% on a 30-year mortgage doesn't mean you'll qualify for it. In order to qualify for the best deals on a home loan, you'll need to meet the lender's definition of a "well qualified borrower." This means having a credit score of about 720 or higher, having a favorable debt-to-income ratio, etc.

Related Article:
How to Get the Best Rates on a Mortgage

Advice on Getting a Mortgage in 2009

2008-12-29T12:08:00.000-08:00

There are only three more days until the new year, so I thought it was a good time to make a list of mortgage tips for 2009 home buyers. If you've been following the news over the last year, you'll realize that much has changed in the world of real estate, credit and mortgage.

The home buyers of 2009 need to understand what all has happened to our economy, and how it affects their chances of getting qualified for a mortgage loan. And that brings us to the purpose of this article. Here is my advice on getting qualified for a home loan in 2009.

Tips for Getting a Mortgage

If you ask me, getting a home mortgage loan in the so-called "new economy" is the same as it always has been. The only real difference is that lenders aren't giving loans out to borrowers with bad credit, like they did over the last few years. Subprime loans are going to be hard to come by in 2009, if not completely extinct.

1. Start Saving Money

Before the housing crisis of 2008 - 2009, home buyers with decent credit could get qualified for a "no-money-down" home loan. But this has changed. Today, getting a mortgage without a down payment is nearly impossible. Many lenders are requiring a 20% down payment -- in fact, that seems to be the norm lately.

You'll also need some extra cash for closing costs and other expenses associated with the home buying process. So if you plan to buy a house in the near future, start saving your money now. It help you in getting a mortgage loan, among other things.

2. Fix Your Credit if Necessary

I've never thought it was a good idea to buy a home with a bad credit score. For one thing, it makes a lot harder to get qualified for a loan. And even if you do get qualified, you'll end up paying a much higher interest rate than a person with good credit. This can lead to all sorts of financial problems, including foreclosure.

Here's another reason to review your credit score before getting a mortgage loan. Improving a score takes time, so you need to find out where you stand as early as possible. That way, if your score needs improvement, you can take the necessary steps before applying for a mortgage. This will help you qualify for a loan, and it will also help you get a good interest rate on the loan.

3. Choose the Right Type of Mortgage

Do you know the pros and cons of a fixed-rate mortgage loan versus the adjustable-rate mortgage? If not, you've got some homework today. There are many variations of the home loan, but most of them fall into one of these two categories -- fixed or adjustable. So your first homework assignment is to learn about these differences.

Next, you should consider your home buying situation and your long-term plans, and then choose the best type of mortgage for those plans. For example, if you plan to live in a home for only a few years, then you can probably save some money by getting an ARM loan with a lower rate. On the contrary, if you on plan on staying in the home for many years -- or even permanently -- then you're better off with a fixed-rate mortgage.

And don't count on being able to refinance from one type of loan to the other, down the road. There's no guarantee you can do this. Take the current economy for example. Right now, a lot of people are trying to refinance their ARM loans into fixed rate loans. But property values have dropped significantly in many parts of the country, leaving homeowners upside down in their mortgage loans. This means that many homeowners are stuck with their ARM loans -- unable to refinance because they owe more than their homes are worth in the current market.

This is just one scenario that illustrates the importance of choosing the right type of mortgage for your particular scenario.

4. Use the Internet to Save Time

This is one of the most common pieces of advice I give to first-time home buyers. The Internet can save you a lot of time and energy when getting a mortgage loan. But a lot of people are afraid to get online quotes because of all the identity theft stories in the news. Let me offer this advice on the matter. If you follow the Internet security tips we offer here on this blog, your personal information will be safely guarded. On top of this, you'll save yourself some time by getting mortgage offers from several lenders at once. It's a great way to get the ball rolling.

The Best Online Lenders for Home Loans

2008-12-21T08:11:00.001-08:00

Reader Question: We are buying a home early next year, and we want to get mortgage quotes online to save time. Who are the best online lenders for home loans these days?

As you can tell by the yellow box on the side of this blog, I am partial to LendingTree as an online lender. I just like everything about their business model, and that's why I recommend them so strongly.

But let's go beyond that one company. Here are some things you need to consider when choosing a web-based lender in 2009.

1. Which ones are still around?

You ended your question with "these days," and that pretty much says it all. Two years ago, there were a lot more web-based lenders than there are today. Many of them collapsed during the mortgage / housing crisis that came to a head in 2008. In 2009, you will have fewer options when choosing the best online lender for your home loan. But this is good news as well as bad news. While you have fewer companies to choose from in 2009, you can rest assured that the ones still around are well-run and well-financed. They have, after all, survived the worst economic crisis of our lifetime.

2. Which lenders are on stable ground?

We just talked about the economic turmoil our country is going through. So when choosing an online lender for your mortgage loan, it's important to research the company behind the website. Start by running their name through Google's news search engine to see what comes up. Is it good news or bad? Are people predicting their collapse? The best lenders will not only survive in 2009, but rise to the top as well. So with a little homework, you can easily find out which lenders to avoid and which ones to consider for online quotes.

3. Which lenders have the best reputation?

Also during the course of your online research, keep an eye out for any "bad press." If you see a consistent pattern of complaints and other negative information about a particular online lender (or their parent company), it's probably best to steer clear of them. Of course, you always have to consider the source when doing this. Sometimes, even the best lenders have unhappy clients. So don't rule them out based on a single piece of bad news. Remember, you are looking for reputation patterns -- for better or for worse.

4. Which ones have the biggest network to leverage?

Some online lending sites only give you access to a single company. For example, if you visit the website of a company like Bank of America to get online mortgage quotes, you'll probably only get offers from BOA itself.

Other lending websites, however, give you access to a wider range of brokers or lenders. In other words, you submit a request for a mortgage quote through the website, and then you receive offers from multiple lenders. Without question, this is the best way to find a home loan online. So, by extension, the best online lenders in the U.S. are those that have access to the biggest networks.

The Truth About Instant Mortgage Quotes

2008-12-19T10:21:00.000-08:00

What is an instant mortgage quote and how do I get one? Is it really an instant offer from lenders? How can they give me a quote so fast without even reviewing my finances?

These are common questions about mortgage shoppers, and I can certainly understand the confusion. You see advertisements for instant loan quotes all the time. But it makes you wonder ... how can a mortgage broker or lender offer a quote so fast, when they need to review your financial situation first?

The answer is two-fold:

1. There is no such thing as a truly instant mortgage quote.

Even a basic, cursory review of an applicant's finances will take some time. So the only way to make the process instantaneous is by offering "blanket" quotes to everyone, regardless of their qualifications -- and that would be a waste of everyone's time. Sure, this initial process can be pretty quick, thanks to the Internet. But it's just not instant.

2. The initial quote is far from approval.

It's also important to realize that this kind of up-front mortgage quote is based on limited data. So it's not the same as a pre-qualification or pre-approval. In other words, just because you get an instant quote for a certain loan amount and interest rate, it doesn't mean you'll receive final approval for that amount. This will make more sense when you read the series of events described below.

The Online Mortgage Quote Process

When you hear the word instant used to describe this process, it usually refers to online quotes and the companies that provide them. This truly is one of the fastest and easiest ways to get the ball rolling. Here's an overview of how the process works:

Step 1 - Choose an online lending website. Here are some security considerations to keep in mind.
Step 2 - After reviewing the security recommendations provided above, provide the requested information on the mortgage website. Typically, this will be a short web form asking for your name and contact info, your desired loan amount, size of down payment, desired mortgage terms, etc.
Step 3 - Once you have submitted the information needed for the online mortgage quotes, you will eventually receive some offers from brokers and/or lenders. This may come in the form of emails, online messaging through the lending website, or a combination of the two.
Step 4 - You would then review the quotes presented and see which one offers the best interest rate and terms. Just keep in mind you may not actually qualify for those terms -- it's just an initial offer based on the information you provided.
Step 5 - Based on the mortgage quotes provided, you would choose a broker or lender and follow up with them by email or phone.
Step 6 - Eventually, you would go through a more detailed review. The lender will request financial documents such as your W-2 forms for the last two years, pay stubs, etc. They will also pull your credit score to see where you stand. You'll eventually be pre-qualified for a certain loan amount, and you can use that pre-qualification letter when house hunting (it shows the seller that you are capable of buying their home).
Here are some of the things you should do before you apply online for a loan.

This is the basic process that takes place when you request the so-called instant mortgage quote. Your actual experience may differ from what I've outlined above, based on any number of variables. But at least now you have a general idea of what takes place.

Not Instant - But Still Convenient!

When people email me asking about home loans, I usually refer them to one of the big online lender websites. I do this because it's a convenient way to initiate the mortgage application process. As you can see from the outlined steps above, it doesn't take much to get started.

It's also a convenient way to compare mortgage quotes / offers from more than one lender. In some cases, you can receive information from up to four lenders at once -- and you can get it by the end of the day, straight to your email inbox.

Before You Apply for a Home Loan Online

2008-12-16T14:24:00.000-08:00

Summary: In this lesson, I'll explain the steps you should take before you apply for a home online through a mortgage lender's website.

Applying for a home mortgage loan via the Web is really quite simple. In fact, that's one of the reasons I publish this blog -- to teach people who easy the process can be. But in reality the process starts long before you apply online for a home loan quote. At least, it should.

Before You Get Home Loan Quotes

Before you start visiting lender websites and requesting quotes, you should spend some time reviewing your finances and coming up with a realistic budget for yourself. Here are five things you can start with:

1. Start Saving Money

In the current economy, most lenders will require you to make a down payment on the home you intend to buy. You used to hear about "no money down" home loans all the time, but they are hard to come by these days. This is true with online mortgage lending as well. In fact, you'll probably be required to make a down payment in the neighborhood of 20% -- especially if you want to get a decent interest rate on the loan.

That's just one of the reasons you should start saving money. You'll also need enough cash to cover your closing costs, and these can add up to several thousand dollars. Most lenders will review the amount of money you have in checking / savings for this very reason. If you apply for a home loan online you could very well save some money on these closing costs, but you should prepare for the worst and hope for the best.

2. Review Your Credit Reports

When you request a quote for a home loan online, what you get back is just an initial offer. After you follow up with the mortgage lender or broker, they will review your finances much more closely. Your credit score is a big part of this review process, and your score is based on the information contained within your credit reports. So early on in the home loan process, you should get copies of all three of your credit reports and review them for errors / inaccuracies.

If you do find an error, dispute it through the company that produced the report until the item gets removed. Inaccurate information on your credit report can drag down your score, which makes it harder to get qualified for a mortgage loan.

3. Check Your Credit Score

We just talked about the importance of having a good credit score in this economy. So this is another item you should obtain before you apply online for a home loan. Remember, your credit reports and scores are two different things entirely. The former is a record of your financial history, and the latter is a number. The higher the number the better. A high credit score will make it much easier to qualify for a mortgage, and (more importantly) it will allow you to get the best interest rate on that loan.

You can learn more about obtaining your scores on the credit page of our main website.

4. Determine Your Budget

I was recently watching a news program with yet another sad story of mortgage foreclosure. They were interviewing the person who lost a house to foreclosure, and she said: "When we got the home loan we just figured we could afford it, because the mortgage lender approved us for the loan."

This completely backward, and I've been telling people this for years. Don't ever let a lender tell you how much you can afford to pay each month. You must determine this for yourself. So before you apply for a home loan online, you need to have a budget in mind -- including the maximum amount you can afford to pay every month.

Online Mortgage Lending Explained

2008-12-16T12:10:00.001-08:00

You've seen the ads on TV. You've heard people talking about it. You've even encountered the websites when surfing the Internet. It's known as online mortgage lending, and it can help you find a home loan while saving time and energy in the process.

But what is online lending and how does it work? Is it safe? And how much of the process actually takes place on the Internet? These are common questions among mortgage shoppers, and rightfully so. Here's what you need to know about online lenders and the services they offer.

Online Lenders - What's In a Name?

The first thing you need to realize is that different lenders use the word "online" in different ways. For example, one company might claim to offer online mortgage lending services when they are actually just a regular "bricks and mortar" lender with a basic company website. Other companies, such as LendingTree and E-Loan, truly specialize in Internet lending and offer a variety of web-based services to back that up.

When I refer to online mortgage lenders in the context of this article, I'm referring to the latter example -- I'm talking about the new breed of home loan websites.

How the Process Works

It's also important to realize that only a certain part of the lending process takes place online. In most cases, it's just the "front end" of the transaction that happens through the website. This includes the mortgage application and the initial review by one or more brokers.

To get the ball rolling, you would visit the company's website and fill out a form with some basic information about (A) yourself and (B) the type of loan you want. After that, you'll typically get email offers from lenders or brokers, and you can then review those offers to see which one has the best terms.

Keep in mind that the offer is not an actual loan approval, and the terms presented will depend on your level of qualification (income, credit score, etc.). This is something that often confuses people about online mortgage lending websites. They fill out the form and they receive several offers from the lenders on the other end, and they think: "Wow, I just got approved for a loan!" But this is not the case.

After the initial online application / review, you will still go through an in-depth financial review, wherein the lender looks at your current income, debt levels, credit score, etc. The final approval comes after all of that ... and after you have found a home you want to buy.

Related articles:

So let's sum up what we have discussed in this lesson:

Today, there are some companies that specialize in the online lending process and offer a variety of web-based tools. Getting mortgage quotes online can save you time and money. In most cases, only the initial steps of the process take place on the Internet, and this will be followed up with phone calls, emails and possibly even an office visit to a local broker or lender's office.

During the online mortgage lending process you should also take certain steps to protect your identity (see the second link provided above for more on this). If you would like to get started with the quote process, refer to the yellow box at the top of this blog.

Online Mortgage Advice - How to Get Mortgage Quotes From the Web

2008-12-16T08:07:00.000-08:00

Summary: In this blog post, I'll offer some online mortgage advice to help you get quotes from mortgage lenders via the Internet.

Imagine this. You're shopping for a home loan, and as a smart shopper you want to compare multiple offers. So you go online to a certain website, and you fill out a short form with information about yourself. By the end of the day, you receive information from several different lenders or brokers -- straight to your email inbox.

Sound too good to be true? It's not. These days, there are many reputable companies that offers this kind of online service to consumers. You've probably even seen their ads on TV. It's a great way to save time and energy while achieving your ultimate goal of finding a home loan. So in this article, I'd like to give you some online mortgage advice based on my own experience with this industry.

Here are the steps I recommend when getting mortgage quotes online.

Step 1 - Determine Your Home Buying Budget

Some people think a lender will only approve them for a loan they can afford. In truth, this is a flawed way to look at things. And as we have seen from the housing crisis of 2008, this is simply not the case. You cannot rely on a mortgage lender to determine your housing budget. You have to do that for yourself. This is one of the most important pieces of advice I can give you, related to online quotes.

Use a mortgage calculator to get a rough idea of the monthly payment you can afford. Be sure to consider all of your other monthly expenses, such as your car payment, credit card bills, groceries, insurance, entertainment and savings. This will help you determine how much of a loan you can afford, and you can use that number as a cap when requesting quotes.

Step 2 - Choose a Lending Website

The best online mortgage advice I can give you here is to choose a well-known company, such as the big-name brands you've seen advertising on TV. These companies spend a lot of time and money developing their reputations, which means they also want to protect their reputations. They do this by offering a good service with built-in security, and by treating their customers right.

Step 3 - Complete the Online Request

There's actually not much to say about this step, because it's very straightforward. But it needs to be included in the list. Once you've chosen a lending website, just follow the instructions they provide to request a quote. In most cases, you will be asked to provide your name and contact information, the amount of loan you wish to apply for, the amount you have to put down, and similar information.

After you submit the form, you will get some preliminary offers from mortgage brokers or lenders. Keep in mind these offers will likely differ from the loan amount and interest rate that you ultimately qualify for. The online process is just to get the ball rolling. You'll go through a more thorough approval process after this initial request.

So there you have it -- online loan quotes in three easy steps. I told you it was simple. If you'd like more advice on this process, of if you'd like to get started requesting an offer, check out out our mortgage quotes page.

Getting Home Loan Quotes Online

2008-12-15T14:29:00.000-08:00

The Internet has made all aspects of the real estate process easier. You can locate properties faster, find home values easier, and get home loan quotes from lenders with a lot less effort.

Of course, you also need to exercise some caution when applying for a home loan online. You must guard your personal information from identity theft, as much as possible. This is why a lot of folks are afraid to get loan quotes via the Web. They think that everyone is out to get them, and that all websites lead to identity theft. But this is simply not the case.

Home Loan Quotes & Internet Security

Let me offer you some reassurance, based on my own experiences with this industry. With a basic understanding of Internet security -- and a healthy dose of common sense -- you can enjoy the speed and convenience of online home loan quotes while also protecting your personal information. Here are five tips on doing just that.

1. Stick With the Names You Know

I recommend using companies and websites you've heard of before. For example, if you were to use the website of a big-name brand (like Ditech, eLoan or LendingTree), you could be fairly certain there would be no "monkey business" behind the scenes. These companies, and others like them, have a lot invested in their reputations. So they would be foolish to act unethically. Personally, I would never provide my personal information to a company I've never heard of before. I recommend you exercise the same caution when getting home loan quotes via the Internet.

2. Look for the 'S' in the Web Address

A secure website has special encryption to prevent hackers and identity thieves from accessing certain areas. You can tell if you're on such a website by looking at the web address / URL up in your Internet browser's address bar. Before the "www" part, there should be an "https://" prefix. Note the letter 's' in that prefix -- this must be present to indicate a secure web page. If it starts with "http://www" (without the letter 's'), then it's not a secure site and you should not transmit personal information through it. Find a more secure place to request a home loan quote.

3. Look for Third-Party Verification Seals

Today, there are companies whose sole mission is to verify the Internet security of other companies. You've probably seen their logos at the side or bottom of financial websites. For example, you might see a graphical seal of approval that says something like "verified by TRUSTe."

In most cases, these graphics are hyperlinks as well, and you can click on them to check the security verification status of the website you are currently using. All of the big-name online mortgage companies have these verification seals on their websites. Combine this with the first two recommendations above, and you can be 99% sure you're on a safe and legitimate website.

4. Trust Your Instincts

If something doesn't seem right to you, there's a good chance it's not. For example, if a website asked you for bank account numbers and passwords as part of the home loan quote process, you would know something wasn't right. Why would a mortgage broker need this information? They wouldn't, of course. Yet you would be surprised by the number of scams online that operate in this way. Trust your instincts when using financial websites. And when in doubt, back on out.

Of course, if you follow the previous tips I offered above, you can avoid this kind of thing altogether.

5. Research a Company / Website Before Using It

Just by using Google, you can become an amateur detective and research everything about a particular company -- aside from their private financial data, of course. I recommend you do this before dealing with any kind of financial company, but especially when dealing with a website that offers online loan quotes.

Conclusion and Going Forward

With a little bit of research, and a lot of common sense, you can capitalize on everything that's good about the Internet while protecting yourself from the bad. Follow these five pieces of advice when requesting mortgage offers via the Web, and you'll be more likely to enjoy a smooth and safe process. And remember … when in doubt, back on out!

Related article: How to Apply Online for a Mortgage Loan

California Real Estate Foreclosures Skyrocket

2008-11-08T15:58:00.001-08:00

The rate of California real estate foreclosures has reached record numbers. This is largely fueled by adjustable rate mortgages that reset to higher rates, catching the homeowners off guard with a whopping mortgage payment. This same scenario has led to an increase in real estate foreclosures beyond California as well, but few states are suffering like the Golden State.

The worst part about is that many people don't realize there are ways to stop foreclosure in California (or anywhere else for that matter). In most cases, mortgage lenders do not want to foreclose any more than the homeowner wants it. The real estate foreclosure process in California is expensive and time-consuming for the lender, and the last thing they want is more foreclosed homes to deal with. They have to maintain the properties, auction them off, and (in many cases) manage them for months until they get a buyer.

This is where foreclosure avoidance comes into the picture. Lenders are usually willing to work with a borrower to find some kind of solution to their payment troubles. The types of "work out" programs vary from one lending institution to the next, but they all fall in one of two categories:

The California homeowner has only suffered a temporary financial setback, and would like to get caught up on the payments. In these cases, a real estate foreclosure can be avoided through repayment plans. Basically, the mortgage lender spreads the back payments over the future payments, to help the homeowner get caught up gradually over time.

In some cases, however, the borrower's financial problems are more serious. So if the homeowner simply cannot afford the payments anymore, the only way to avoid California real estate foreclosure is to sell the property. Some lenders will allow the homeowner to sell at a reduced process, in order to sell quickly. This is known as a short sale process.

Here's what you should take away from this article. There are ways to avoid a foreclosure process in California and elsewhere in the country. President-elect Obama has even been talking about a moratorium to halt future foreclosures for a certain period of time, in order to give struggling homeowners a chance to catch up. So if you have gotten behind on your payments, but you think you can get back on top of them, contact your lender to see what they can do.

Of course, the best thing to do is avoid a situation where California real estate foreclosure happens in the first place. You can do this by being a smart mortgage shopper, buying within your financial means, and choosing the right type of mortgage loan for your home buying situation.

Related articles:

What is a Mortgage Amortization Schedule?

2008-11-04T15:01:00.000-08:00

Article Summary: What is mortgage amortization and what does it mean to a home buyer / homeowner? This is actually an important topic that confuses a lot of people (including myself). So I asked Melissa, our resident mortgage guru, to explain what amortization is and why home buyers should understand it.

Let's start with a quick definition. Amortization is defined as the paydown of a liability, such as a mortgage loan, in regular monthly payments over a specified period of time. The monthly payments are divided between the principal and interest of the loan.

As a part of the mortgage loan process, your lender will provide you with an amortization schedule that shows you the breakdown of your monthly payments -- how much goes to pay the interest, and how much will pay down the principal and the remaining balance until the loan is paid off. This schedule can be provided in a monthly or annual format.

As a home buyer, there are some things you need to understand about the amortization calculation or schedule you are given:

What to Know About Your Amortization Schedule

First, you want to make sure the lender has not sold you a negative amortization loan. This means that your monthly payment does not cover both principal and interest, so there would be a remaining balance at the end of your mortgage loan term. If the payment is not enough to cover the full amount of interest due as well as the principal for each month, the remaining unpaid interest amount would be added on to the balance of the loan, again resulting in a balance at the end of your loan term.

This was a common practice during the recent real estate boom of the 1990s, because many borrowers were initially unable to qualify for or afford the full payment amount on the size of loan they wanted. So the mortgage loans were structured to adjust that payment amount at a later date. This could present a real problem to a borrower if the negative amortization schedule was not fully disclosed, because at some point the loan payment is going to adjust in order to "correct" itself -- and this could mean a significant increase in the size of the payment.

You also want to make sure the term (or length) of the mortgage loan coincides with the amortization schedule you are given. For example, your loan payment is calculated or amortized over a 30 year term, but your lender has put you into a 7-year mortgage product. What this means to you is that, at the end of the 7-year loan term, the full remaining balance would be due! This is commonly referred to as a balloon loan. The previous scenario comes into play again in this situation. It spreads the payments out over a longer term, thereby making them more affordable, with the hopes that the homeowner will sell or refinance before those seven years are up.

No doubt, this can be a confusing subject. That's why it helps to have a visual aid (the mortgage amortization schedule / table) as well as someone who can explain it to you. At the same time, it's critical that you do understand this concept, so that you don't face any unpleasant surprises several years into the life of your loan.

Related blog posts:

The Closing Costs to Refinance a Home

2008-11-03T10:34:00.000-08:00

It's important to consider closing costs before you try to refinance your home loan, because the cost of refinancing might outweigh the benefits. We've posted a new article on this subject to help you understand the costs associated with a refinance loan.

A lot of homeowners in the U.S. are trying to refinance their homes right now. Many are trying to escape the uncertainty of their ARM loans as a result of what they've seen on the news. Others simply want to take advantage of better credit scores and/or lower interest rates to save money on the new loan.

Regardless of your reasons for pursuing a refinance loan, you need to figure out how much it's going to cost you. This will help you determine your "break-even point," which is one of the most important concepts of mortgage refinancing. Simply stated, if you pay more in closing costs to refinance your home than what you will save over the term of the new loan ... then it doesn't make sense to go forward with it.

Of course, the reverse is also true. If you get a much lower interest rate on the new loan, and you keep it for many years, the money you save could very well offset the cost of closing on the new mortgage.

Have I confused you? If so, you really need to read the new article we have posted on this subject. Don't trust a lender to tell you when it makes sense to do a refi ... find out for yourself. You can do this by determining the cost of refinancing and then using that number to calculate your break-even point.

Get a Free Homeowners Insurance Quote Online

2008-11-02T16:06:00.000-08:00

I am a self-admitted real estate geek, and also an Internet geek. So when I see a company who combines the best of both worlds, I just have to share it with others. Today, I want to explain how you can get free online quotes for homeowners insurance from big-name providers like Farmers and Nationwide ... without having to make a single phone call.

If you'd like to skip this overview and get a free quote online right now, you can do so from the insurance page of our main website. Otherwise, keep reading and I'll tell you why I like this website so much.

There is a website / company called Insure Me that makes the process of collecting homeowners insurance quotes faster and easier than ever before. They've put the entire process online and made it free for everyone. All you have to do is visit their website and fill out a short form with very basic information (name, zip code, type of insurance you need, etc.). Then you'll hear back from local insurance agents in your area, agents who work for well known companies like Nationwide, Unitrin and Farmers.

You can then compare the homeowners insurance policies and quotes provided in order to choose the one that best fits your needs. And the best part is that you don't have to spend half a day making phone calls -- you just submit a request online and the agents bring the information to you.

Get Insurance Quotes Online Today

If you are buying a home, you will need an insurance policy before the mortgage lender will allow you to close the deal. In most cases, you actually have to bring your proof of coverage to the real estate closing, and you have to be covered for at least a year.

This is why it's so important to get homeowners insurance quotes early on in the home process. It will help you keep the process moving forward, and it will prevent unnecessary delays. Combine this necessity with the convenience of getting free online quotes through the Internet, and you can see the value of a website like InsureMe.com.

Don't put the process off any longer. Start getting homeowners insurance quotes today so you can begin comparing policies. It will help ensure a smooth home buying process. Click here to begin.

How to Stop Mortgage Foreclosure - Yes, You Have Options

2008-11-02T11:50:00.000-08:00

Right now, thousands of homeowners in this country are researching ways to stop mortgage foreclosure. For one reason or another, these homeowners have fallen behind on their mortgage payments. Many can no longer afford to make their payments each month. Many of these homeowners are all asking the question: How can I stop a mortgage foreclosure from happening?

In this article, we will look at some of the ways you can avoid having your home foreclosed on. It's an important topic for a lot of homeowners, so we will do our best to cover the bases here.

Most homeowners don't even realize they have options available to either (A) get caught up on their payments or (B) sell the home before the bank forecloses it. In fact, those are two primary paths we will discuss in this article. When discussing how to stop a mortgage foreclosure from taking place, all of the techniques fall under two categories:

Category 1 -- Techniques to help you get caught up on your mortgage payments, and thus avoid being foreclosed on.
Category 2 -- Techniques to help you sell the home in lieu of foreclosure.

Let's start by covering category 1, the "workout" options that are available to homeowners. Most lenders will try to avoid foreclosing on a home, if at all possible. The process can be time-consuming and expensive for the bank. They have to go through a legal process that can take months, maintain the property in the meantime, sell it through an auction, etc. All the while, they have a non-performing loan on the books that is costing them money.

So whenever somebody emails me asking how to stop foreclosure on their home, my first question is always the same: "Have you spoken to your lender about it? Have you asked about workout options to get back on track with your payments?"

Of course, this assumes that the homeowner has only suffered a temporary financial setback, and that he or she feels confident that they can get back on track with their payments. In this type of scenario, many lenders will offer the borrower what they collectively refer to as "workout options" -- ways of getting caught up on the past-due payments.

In most cases, lenders will offer one of two ways to get caught up on past-due mortgage payments. The first option is to pay the owed amount as a single lump-sum payment. This option is known as reinstatement. Because a lot of homeowners cannot afford this option, most lenders offer a second option through which you amount owed is spread out over the future payments. This is the gradual, more affordable approach, and it's usually referred to as a repayment plan.

Both of these methods -- reinstatement and repayment -- can help you stop mortgage foreclosure from happening by getting caught up with your missed payments. Ask your lender what kind of options they offer.

But what if you simply cannot afford the payments anymore, and you don't foresee that changing in the future? In this case, your best option might be selling the home before the bank forecloses on it. In fact, many lenders will allow homeowners to sell for a reduced price (below market value) in order to make a quick sale. This is known as the short sale technique and it's worth considering as well.

How you stop mortgage foreclosure on your home will depend on the financial situation you are in. The main thing is to do everything you can to avoid being foreclosed on, because it will damage your credit and make future homeownership difficult.

How Much Mortgage Can I Afford to Borrow?

2008-11-01T13:33:00.000-07:00

How much of a mortgage can I afford by borrow when buying a home? It's a common question among first-time home buyers, and for good reason. Take out more of a mortgage loan than you can afford to pay, and you could become another foreclosure statistic. And that's bad for all parties involved -- for you, the bank, and even the economy.

So in this article I'd like to talk about the key concepts of mortgage affordability and the process of determining how much you afford to pay.

Lenders Cannot Tell You What You Can Afford

Many home buyers wrongfully assume that a mortgage lender will only approve you for a loan amount that you can afford to pay. But this is not always the case. The lending industry is driven by profits -- they are not in the business of looking out for consumers. You are the only one who can determine the affordability of a certain size mortgage payment.

"But a lender wouldn't let me borrow more than I can afford ... they would lose out too, right?" This is a common argument, but it's also a flawed way of looking at this subject. In this country, there is a secondary mortgage market. I won't go into the financial weeds on this, but it basically gives lenders a way to sell off their mortgage loans soon after they grant them. And to a certain extent, it makes them less concerned about what you can truly afford to borrow (because they can sell of the risk associated with the loan).

We are seeing this happen right now, in staggering numbers all across the United States. Lenders gave people mortgage loans that they could not possibly afford, but they "eased" them into the loan with a low initial interest rate and (often) downplayed the risk of a future rate increase. You know the rest. The mortgages reset to higher interest rates, and millions of Americans found themselves unable to afford their mortgage payments. Then came the foreclosure crisis ... the housing crisis ... and, now, a full-scale economic crisis.

I believe I've made my first point. You are the only person who can determine what kind of mortgage you can afford to borrow and pay back. The only thing a lender can tell you is the amount they'll qualify and approve you for -- not the amount you can realistically afford.

So, How Much of a Mortgage Can You Handle?

Assuming I've convinced you that this is entirely your decision, we can move on to the next logical question. How do you determine how much of a mortgage you can afford to borrow?

The first step is to determine your home buying budget. By this, I mean the amount of money you could afford to put toward a mortgage payment every month, after all of your other monthly expenses have been covered. So start by adding up your monthly expenses -- car payment, credit card payments, food, gas, savings, etc. You can leave your rent off, because that payment will disappear when you buy a house (hooray!).

Next, you can take a hypothetical sale price for a home (or better yet, the actual sale price for a home you're interested in) and put it into a mortgage calculator. You can find these calculators online, and most of them are free to use. These tools will ask you for several pieces of data -- (A) the principal amount you need to borrow, (B) the interest rate, (C) the length or term of the loan, and (D) the property taxes. Some of these items are optional, such as the tax and interest amounts. But you'll get more accurate results by entering as much information as possible.

The more advanced calculators will let you enter your income as well, which is even more useful in determining how much you can afford to borrow. You can find these kinds of tools at Interest.com and a few other places.

When you run the numbers, you'll have a better idea of how much mortgage you can afford to borrow, because you'll have an estimate of your monthly payment based on the principal amount you're going to borrow. Compare that number to the amount of money you can afford to pay each month (after your other expenses), and you'll be honing in on your mortgage affordability level.

Keep in mind that the interest rate the lender gives you will have a lot to do with your monthly mortgage payments. So until you know what kind of rate you qualify for, you'll have to use the default setting for interest rate on the mortgage calculator. If you do have all the pieces of the puzzle (the principal, the property tax amount, the interest rate, etc.), you'll get a fairly accurate idea of what you can expect to pay each month for a certain mortgage amount.

Related blog posts:

How to Find the Best Real Estate Agent for Your Needs

2008-11-01T08:29:00.000-07:00

Want to skip the article and start searching for an agent right away? Start here: Find a Top Real Estate Agent to Buy a Home

When you consider what a real estate agent will do for you during your home buying or selling experience -- and when you consider the amount of money on the line -- it only makes sense to find the best real estate agent for your particular needs.

The question may people have is not "why," but how do I find the best agent for me? I'll give you some tips on that in just a moment. But first, I want to assign a definition to the word "best," which is just an empty superlative without a definition behind it.

What makes a real estate agent the best one for you? For starters, it depends on whether you are buying or selling a home. Some agents help buyers and sellers alike, while others specialize in one area. My advice is to find one who specializes in either the home buying or selling process, whichever is applicable to your situation.

For example, if you are planning to sell your house, you don't want an agent who spends most of his or her time helping buyers. In this scenario, the best real estate agent for you would be one with a long history of helping sellers.

And speaking of experience, this is the next thing you need to consider when choosing an agent. Most will publish their skills, training and experience onto their websites, which gives you a quick and easy way to size them up. I recommend you skip over the fluff messaging about "quality and integrity" and zero in on their accomplishments. For example:

If the agent primarily helps sellers, how many has he or she helped over the years? What is the average selling time when she represents a client? Does she have a history of selling at or above market value?
If the real estate agent helps mostly buyers, how many has she helped? What have those clients had to say about her, in terms of testimonials? How well does she know there area where you want to live (schools, neighborhoods, etc.)?

Now let's talk about some of the ways you can find the best agent for your particular needs. These days, thanks to the Internet, finding a real estate professional is easier than ever. Here are some of the things you can, both online and off:

5 Ways to Find a Real Estate Agent

I recommend you start the process by seeking referrals from family members or friends. Who better to recommend an agent than the people you know and trust? Often, you don't need to look any further than your own "circle" to find the best real estate professional for your needs.
If you have a preference for a certain real estate company (like one of the big national names), you could start with their website and look for agents in your area.
I'm a big fan of reading the blogs of local real estate agents, as way of judging their intelligence, personality and professional skill. You can easily find the blogs of realty professionals in your area just by doing a Google search and sifting through the results. For example, here in Austin I would do a search for the phrase "Austin real estate blogs." I got a ton of results when I searched this, by the way.
You could use one of the big Realtor search websites, such as Home Gain. It's a free and easy way to get matched up with local Realtors in your neighborhood. Start here: Check Commission Rates in Your Neighborhood

I hope this guide to finding the best agent has give you some useful ideas, and I wish you all the best in your future real estate endeavors.

Frequently Asked Questions About Credit Scores - Credit FAQ

2008-10-30T15:36:00.000-07:00

In response to the economic crisis that came to a head in 2008, we recently launched a new blog to answer consumer questions about credit scores (as they relate to mortgages and home buying). Shortly after the blog was announced, the questions came rolling in! Some trends have already emerged, and we would like to present those trends in this list of credit score FAQs.

This is a hot topic among home buyers, but it will become even more popular in 2009 and beyond. See question #3 to find out why.

1. Where do my credit scores come from?

This is a question we get two or three times a week, so I'm happy to answer in this FAQ list. Your credit scores come from Experian, TransUnion and Equifax. These are the three companies who maintain credit data on consumers in the United States. Each company can produce a credit report on you, which is basically a record of your financial history (your debt, your payment history, etc.).

These reports are put through a scoring system to produce your credit score. So you actually have three different scores -- one from each of the reporting companies mentioned above.

With that one answered, let's move on to the next credit question on the FAQ list:

2. Why is credit so important when buying a home?

When you apply for a mortgage loan, the lender will review your finances from every possible angle. They will verify your current income and debt, and they'll also check your credit. Most lenders will either use a merged score that averages the three mentioned above, or they'll just look at two out of three credit scores. This gives the lender some idea of how responsible you've been in the past, from a financial perspective.

So a good / high score will help you get approved for a loan, and it can also help you get the best interest rates (which means a lower monthly payment). This is why it's such a hot topic among home buyers.

Moving right along, let's tackle the next credit score question on the FAQ list:

3. How has the economic crisis affected all of this?

This is a common question about credit in the current economy, and for obvious reasons. As a result of all the foreclosures we saw in 2007 and 2008, a lot of lenders have bad loans on their books. So as we go forward into 2009, they will be less inclined to make new loans until they figure out how to recoup some of their losses and prevent future ones from happening.

In addition, there are new regulations on subprime lending (giving loans to people with bad credit). Because of these and other factors, home buyers will need higher credit scores to get mortgage loans in 2009 than they needed in the past.

This brings us to another popular question about credit that people often ask:

4. What can I do to maintain a good credit score?

In a nutshell, you can keep your score high just by being financial responsible. This means paying your bills on time, managing your debt well, and using credit cards responsibly (i.e., don't have too many cards and don't max them out). Your history of bill payments accounts for about 35% of your score, so if you have a pattern of late payments it can do serious damage to your credit, especially if those accounts are sent to a collection agency.

5. How do I find out what my score is?

Because you have three of them produced by three different companies, you have to request your scores through those companies (Equifax, TransUnion and Experian). In most cases, you will have to pay for the information, but it's not expensive. By law, you can request your credit reports once a year for free ... but there is no such law for your actual scores.

You can also find package deals that include all of this stuff for one price. You'll find some website recommendations on our credit reports page.

Get Answers to Your Credit Questions

Do you have questions about credit reports and scores? If so, check out new Q&A blog over at the Home Buying Institute. It's a free service. Here's the web address:
http://www.homebuyinginstitute.com/help

What Is a Second Mortgage and When Is It a Good Idea?

2008-10-28T16:57:00.000-07:00

Article Summary: What is a second mortgage and why do people use them? When is it a good idea to get a second mortgage, and when is it a bad idea? These are the questions we will address in this article.

A second mortgage is an installment loan or line of credit that uses your home as collateral. The amount you are able to borrow against your home is determined by the amount of equity (ownership) you have in your home. For example, your home is currently valued at $300,000 but your mortgage balance is only $200,000. This means you have $100,000 worth of equity, or ownership in the home.

Most lenders will loan you up to 80% of your available equity. They will secure their "interest" in your home by filing a lien behind the lender who loaned you the money for the actual purchase (first mortgage) of the home. This means that later on, when you sell the home, both the first and second mortgage will be paid off. Of course, you can also pay off the second mortgage anytime you are financially able to do so. You could also refinance down the road to roll the second and first mortgages together.

An installment version of the second mortgage is just like your first mortgage -- it is a set amount with a monthly payment until the balance is paid in full. This type of loan is typically used for a specific project, such as a swimming pool or a renovation project. The whole amount of the loan is advanced in chunks as the pool (or other project) is being built. Then, when the project is complete, you will start making payments on the second mortgage loan.

Reasons to Use a Second Mortgage

There are many reasons people take out a second mortgage on their home. They may use it to remodel their kitchen, pay for a new addition, or to put in a pool. Or perhaps they need to pay for college tuition for a child, or for the adoption of a child. They may use the second mortgage to pay for a wedding or a dream vacation.

Many people use the loan or line-of-credit to payoff bills and consolidate their debt. Regardless of the reasons, there are several advantages to using a second mortgage. For one thing, the interest paid on the loan or line-of-credit can be used as a deduction on most people's taxes. In addition, the interest rates on a second mortgage are usually lower than the rates for credit cards, student loans and other types of credit accounts.

In particular, homeowners who live in a strong real estate market with good appreciation can take advantage of their equity through the second mortgage option. This can be a good way to consolidate debt. Also, if you have lived in your home for many years and the value of your home will go up considerably with a kitchen or bathroom remodel, then a second mortgage might be a smart financing idea.

Reasons to Avoid It

With all of this being said, there are certain scenarios where it doesn't make sense to take out a second mortgage on your home.

The recent economic downturn we've seen is a prime example of this. Just before the housing bubble burst, homeowners were taking out second mortgages right and left. The value of their homes increased quickly and dramatically, so they were using their newfound equity to make all sorts of improvements -- additions, pools, remodels, etc. Many were even buying cars and second homes. Then, when the real estate bubble burst, they found themselves with over-improved homes and mortgage balances that were much higher than their home was now worth.

Here's what you should take away from this article. A second mortgage can be a useful financing tool in certain scenarios, because it allows you to leverage your home equity at a favorable interest rate. In other scenarios, however, this type of loan doesn't make sense. The key is to know what type of situation you are in, and decide for or against the second mortgage accordingly.

Your Credit Score in 2009 - What You Should Know About Credit

2008-10-27T13:46:00.001-07:00

What credit score will you need in 2009 to qualify for a mortgage loan? It's difficult to say here in the present, because our economy is in turmoil. But one thing is for certain -- home buyers will need better credit scores to qualify for financing in 2009 than they needed in the past.

Bad credit mortgage loans are a thing of the past, and rightfully so. So you must be financially responsible in the present if you hope to buy a home in the future.

Being Credit Smart in 2009

With that scary intro out of the way, let's start your credit-awareness program right away! Here are five more things you should know about your credit score in 2009 and beyond:

1. Your credit score is your key to financing.

When you apply for some kind of consumer loan, the lender will review your financial history to determine your "creditworthiness" (a fancy way to describe the level of risk associated with loaning you money). Much of their review will focus on your credit report and score -- and yes, they are two different things.

Your credit score is a number that usually falls within the range of 300 - 850. Higher is better. When you fall at the upper end of this range, you have a better chance of qualifying for car loans, mortgage loans, etc. When your score is low, however, you could have trouble getting approved for a loan.

2. After the economic crisis, good credit will be more important than ever.

As mentioned above, it has always been important for consumers to maintain a clean credit history and a high score. But in the wake of the economic crisis that came to a head in 2008, good credit will be more important than ever in 2009 and beyond. In the "new economy," lenders will impose stricter criteria on borrowers who seek financing.

I'm not gazing into a crystal ball here. I'm just looking at what's happening right now and projecting it into the future. We are already seeing this kind of trend in the finance world. The bottom line is that consumers with bad credit will face even more obstacles in the near future than they've had to face in the past. It's going to get tougher to obtain the best interest rates on a loan as well. So you need to maintain a good credit score!

3. You need to know what's in your credit reports.

It's not uncommon for errors to show up in a person's credit report. In fact, it happens quite often. It might be a simple typo within your personal data. Or it could be something more serious, like a credit account showing up that's not even yours. This might even suggest identity theft. So there are really two important reasons to know what's in your reports -- (1) to prevent errors from affecting your score, and (2) to spot instances of fraud.

By law, you are entitled to one free credit report per year, from all three of the companies that maintain them. You can learn more and request your information at the website AnnualCreditReport.com (a site that is jointly owned by Experian, TransUnion and Equifax).

4. Bad financial behavior in the present could follow you for years to come.

The financial actions you take now will show up on your credit report for a long time to come, well beyond 2009 for that matter. There are laws that require negative information to be removed after a certain period of time. But that period might be seven to ten years! So, for example, by falling behind on your bill payments here in the present, you could hurt your chances of getting a mortgage loan five or six years down the road. This underscores the importance of being financially responsible.

5. Most credit repair companies are scams -- you can do it yourself.

There are a lot of companies who claim to have the ability to fix all of your credit problems (if you have any). But these companies cannot erase the past. Most of them simply correct errors on their customers' credit reports, and that's something you can do for yourself. In fact, the FTC even warns against these so-called "credit repair" companies, because most of them are scams.

You can learn more about credit scores and how to improve them from this library of article:
http://www.cornettcommunications.com/credit-score.php

Related article: What is a good credit score by 2009 standards?

Mortgage Applications 101 - How to Apply for a Mortgage Loan

2008-10-25T07:37:00.000-07:00

Article Summary: This lesson explains how to apply for a mortgage loan and the things you'll need to do when you submit a mortgage application to a lender.

So you've finally decided to make the big leap and buy a house. Perhaps there is already one you have your eye on. Being that the current real estate is favorable to buyers, you probably have plenty of time to apply for a mortgage loan. But why wait? Most real estate agents won't even talk to you unless you've been pre-qualified or pre-approved by a lender. So why risk losing that special house you've had your eye on to another, better prepared buyer?

Before you can even start shopping for a mortgage loan, or filling out an application for one, you need to know what your credit looks like. You can request all of your credit reports and scores from this page. The best mortgage loan rates go to those borrowers with the best credit and highest scores, so it's a good idea to know what you have to deal with. It will also help you find a good lender with a rate that you actually qualify for.

Application Essentials

Now that you've decided on a lender, they will help you choose the loan program that will best suit your budget (i.e., 30-year fixed, 7/1 ARM, etc.), but they are going to need additional information from you. So when you apply for a mortgage loan, it's always best to come to that first appointment armed with the following:

Paystubs -- 2 most recent for all borrowers
Tax returns -- past two years
Bank statements -- most recent
Statements for retirement accounts, stocks, bonds, investments -- most recent

During the mortgage application process, the lender will also pull credit reports from all three credit reporting agencies (TransUnion, Equifax, Experian) and review the information with you to make sure it is correct. They will also discuss any negative items on your credit.

At this point in the application process, many mortgage loan officers will make a preliminary judgment as to whether or not you will qualify for a loan and be able to afford the payments. They will come up with a set amount they think you will be approved for. This is commonly referred to as "Pre-qualification". Your lender should be able to provide you with this information in the form of a pre-qualification letter.

But we are not done yet. When you apply for a mortgage loan, you will go through a series of evaluation stages, with plenty of paperwork along the way. So let's talk about what happens next.

The next step will be one of two options:

You can request your lender to "Pre-approve" you for a set amount, which means your application and financial documents will be submitted for underwriting and approval, and you will be provided with a pre-approval letter.
Or, you can wait to officially submit your mortgage application when you know how much you need to borrow -- i.e., until you find a home you'd like to buy and your offer is accepted by the seller. You may find the pre-approval letter has a little more weight when dealing with sellers and their agents, so if you are certain you'll be purchasing a home in the near future, and you can stick to your budget, you may want to choose this option.

The next steps in the mortgage application and qualification process will be handled by the lender. They will order an appraisal of the home and, in some cases, request you to schedule a termite inspection. They will also perform title searches to make sure there are no liens on the property and that the seller does truly own the home. They will also obtain a flood certification to insure the home in not in a flood zone.

During this time, you must be diligent to make sure your credit remains good, mainly by paying all of your bills on time. You also want to refrain from making any big credit purchases and opening any new credit accounts. This will lower your debt-to-income ratio and affect your credit score, which could raise some red flags since your lender will pull your credit reports again before closing.

It's also a good time to spend as little money as possible to make sure your bank account balances don't fluctuate too much. You will need to submit another set of pay stubs and statements for all of your accounts before closing on the house.

If all goes well with the above, you should be ready to close on your new home within the time stated in your offer contract to the seller. The lender and title company will schedule the closing so all you'll need to do is show up with a cashiers check for your down payment and closing costs.

You will receive a statement (HUD-1) of all the fees and amounts you will be required to pay at closing at least 24 hours prior. It is important to review this statement for accuracy so there is time to make any necessary changes before the scheduled closing. The final piece of the mortgage process puzzle is the most exciting -- when you are handed the keys to your new home!

Remember that when you apply for a mortgage loan, you are taking the first of many steps in the path to qualification and approval. You need to understand how the process works before you even submit your mortgage application to a lender. By understanding the process, you can better prepare for it. This will make it easier to apply for the loan to begin with, and will also expedite the process.

How to Apply Online

These days, you can use the Internet to save yourself a lot of time and energy. By using certain websites, you apply for a mortgage loan online and get offers from multiple lenders just by filling out a single form. This is a fast and easy way to get the ball rolling.

Of course, you have to use caution when you fill out a mortgage application online, because it will ask for sensitive information such as your Social Security Number. That's why we recommend using trusted names and websites. Get an online quote here.

House Buying Questions - 7 Frequently Asked Questions

2008-10-24T10:49:00.000-07:00

Through our "sister site" over at HomeBuyingInstitute.com, we have answered hundreds of house buying questions over the years. It's natural to have a lot of questions when you buy a home for the first time. It's a sign that you have a curious mind, and they realize the importance of research and education.

We thought it might be helpful to create a list of the most frequently asked house buying questions we have received over the years. We are also getting some new inquiries as a result of the current economic crisis we are experiencing. We have provided answers for those questions as well.

So without further ado, here are some of the things people want to know when buying a house for the first time:

1. Can I afford to buy a house?

It certainly makes sense to start with this question before you research anything else! To be more specific, you should be asking: "Can I afford to buy the kind of home I want?" To answer this house buying question you will need to examine your finances.

Take a look at your income and your debt. Determine how much of your gross monthly income is left over each month after you have paid all the bills. You can exclude your rent from this equation, because that monthly expense will go away if / when you buy a house. The amount you have left over is the amount you can leverage to make a mortgage payment each month. This is a good starting point for setting your house buying budget.

Next, you should start to familiarize yourself with mortgage calculators. You can find them online, and most of them are free to use. Using a calculator, you can take the price of a house and break it down into estimated monthly mortgage payments (for a 30-year loan, for example). This will give you a ballpark idea of how much house you can afford.

2. How do I start the process?

This is another common house buying question among first-time buyers. I always tell people to start with thorough review of your financial situation. We touched on the budget factor above, but you should also get copies of your credit reports and scores (you have three of each) to see where you stand. Lenders will use your credit score, your debt-to-income ratio and other factors when deciding whether or not to loan you money.

If you find out that your credit score is low, you're going to have a hard time buying a house -- especially in our current troubled economy. So you should focus your time and energy on rebuilding your credit so that you can qualify for a mortgage in the future. You also need to review your credit reports to make sure they don't contain errors, because this can also hurt your chances of buying a house.

Start here: Fico Scores/Reports

3. What if my credit is bad? How do I improve it?

This is a question many people are asking when trying to buy a house today, and it has to do with the economic crisis we are going through. Mortgage lenders are becoming stricter with their qualification criteria, so you really need to focus on maintaining a good credit score. If you find out that it's low (and you will know if you apply for a loan and get turned down), there is plenty you can do to improve it. This article explains some of the things you can do to boost your score quickly.

4. Which type of mortgage loan should I choose?

This is an important house buying question for many reasons. It's also a question you must answer for yourself. There are many different types of mortgage loans, but most of them can be classified in one of two ways -- they either have a fixed or an adjustable rate. There are also hybrid loans that combine certain qualities of both the fixed-rate and adjustable-rate loan. For more information, refer to this article on choosing a mortgage type that matches your house buying situation.

5. Do I need a real estate agent?

If you are buying a house for the first time, of if you're buying in an area you're unfamiliar with, I recommend hiring a professional real estate agent to help you. You probably have a lot of questions about the house buying process already, which is a perfect example of why you need professional guidance. The real estate terminology alone can be confusing enough. A skilled agent can help you navigate the process and avoid costly mistakes along the way.

6. How can I buy a foreclosure home?

This is a very common question right now, because there are more foreclosure homes on the market than ever before. Last month alone, more than 80,000 homes were foreclosed upon in the United States. When a bank is forced to foreclose on a house because the homeowner stopped making payments, they will try to sell it off as quickly as possible to avoid further losses. They often do this through a real estate auction process.

In most cases, the bidding at an auction will start below the market value of the home. And unless there's a bidding war that drives the price up, the property could be purchased at a great price. This is what attracts people to buying foreclosures in the first place -- it's a way to save money.

With that being said, I am hesitant to recommend it for a first-time buyer. The regular house buying process can be confusing enough for a "newbie." But when you add in foreclosure laws and all the rest, it can become too much for a novice to handle. On top of that, you would need to pay cash in order to buy a house through an auction, and not many people can afford to do that.

7. What happens at the closing process?

The real estate closing (also referred to as settlement) is when the house if officially transferred from the seller to the buyer. You'll be asked to sign a lot of paperwork, and all of the money that has been held in escrow will be distributed -- the seller will get a check for their proceeds, the real estate agent(s) will be paid, etc.

The important thing to understand about a real estate closing process is that there are certain costs involved. You should get an estimate of these costs in advance, when you get approved for a mortgage loan. This is referred to as the "good faith estimate." Just realize that these initial closing cost estimates are usually low, so you plan on paying more than what the lender tells you up front. A day or two before the actual closing date, you should receive a HUD-1 settlement statement that tells you exactly what you'll owe at closing.

Learn More About the House Buying Process

You probably have additional questions about the house buying process, in addition to those listed above. If so, we recommend perusing the following articles on our website:

I hope this tutorial has answered some of your questions about purchasing real estate, and I wish you well on your journey!

How to Sell Your Home Without an Agent

2008-10-23T17:21:00.000-07:00

Article Summary: Is it possible to sell your home without an agent in the current economy? Yes, but you'll have to prepare for the process and work hard along the way. Here are some of the steps you'll encounter when selling your home without an agent.

If you are like many people in our country, you have seen a rapid decline in the real estate market and home values in your area. Homeowners who need to sell right now are in a tough position, and many are looking for ways to save money. If you are in that tough position of selling your home in the current declining market, you need to get every penny you can from the sale.

Most real estate agents will ask you to sign a contract allocating 3% of your home's sales price as their commission for guiding you through the process of selling your home. In many states, the seller is also responsible for paying the buyer's agent 3% as well. This means that up to 6% of your sales proceeds could be paid to the real estate agents involved in the transaction. For example, if you sell your home for $250,000, then $15,000 of your "profit" (if you are fortunate to make one) will go into someone else's pocket. Wouldn't it be great to cut that fee in half?

Sell your Home By Owner and Save Thousands!

One way to save a considerable amount of money is by selling your home without an agent and listing it as For Sale By Owner (FSBO). You may not think you have the skills or knowledge to do so, and you may not even know where to start. But it's possible to sell a home without an agent if you do the proper research and take the right steps. Here's how to go about it.

Start this process by asking yourself the following question: "What does a selling agent really do?" For starters, they will help you come up with a realistic sales price for your home by using recent comparable sales in your area. You may think they have exclusive access to certain databases to extract that information, but you'd be surprised. You may have a friend or relative in the mortgage or finance business who can help you access that information. Or, you can pay a nominal fee (in the range of $200 -$500) to hire a certified appraiser to prepare a full appraisal of your home including those comparable sales.

Once you come up with a fair and competitive sales price, the next step is to get your home included on the Multiple Listing Service or MLS -- same as that selling agent would do. There are many FSBO services out there that will do this for you for a reasonable fee. Many of these services will also provide you with yard signs, a lockbox, copies of contracts and other legal documents and advice when needed.

Our recommendation: Sell your Home By Owner and Save!

It is at this point you may want to consider staging your home so the photos on the MLS will be appealing to a wide range of buyers. Clean away all of the clutter. Freshen up the paint where needed. Arrange furniture so it increases the feeling of space. Make sure you have some good curb appeal out front.

Now that your home is valued and listed, it's time to start marketing it. Start by putting some highly visible "For Sale" signs in your yard, as well as house flyers with color photos and contact information (in case the buyer wants to schedule a visit to see the inside). You may also want to list your home on websites such as Craigslist.com, or in the local newspaper classifieds section.

Now that your home is listed and you are actively marketing it to potential buyers, it's important to keep it staged, tidy and clean. When you choose to sell your own home without an agent you basically become the selling agent. This means that when a buyer or buyer's agent wishes to see your home, they will contact you to schedule a showing. Often, they will do this with very little notice. It's important to make a positive and lasting impression, because it may be your only chance to show off all the great things about your home to that particular buyer.

The next several stages of the process are usually handled by the buyer's agent. These include making the offer, preparing the sales contract, scheduling the termite and/or home inspection, etc.

If the buyers have included any items they would like you to address in their offer, such as repairs or replacements, you will need to accept them or negotiate the offer, and then follow through on those repairs as needed. You may also want to have your FSBO service or local real estate attorney review the sales contract if you are not comfortable with the language and terminology.

In the final steps of this process, you will have to show up for appointments, inspections and the final closing process, as instructed by the buyer's agent. Lesson learned … do your research when trying to sell your home without an agent (you can find plenty of information online). Educate yourself about the entire selling process, and consult your FSBO service as needed.