Factors and Variables Influencing Mortgage Finance

Posted by Credit Financing Guru

Properties are secured under mortgage to oblige the borrower to make a predetermined succession of loan payments. A borrower can obtain mortgage finance to from a financial institution like banks. Components like loan size, loan maturity, interest rate and loan payment method differs significantly from one creditor to another.

Mortgaged properties levy restrictions on the use or disposal of the property like selling the property before closing outstanding debt payment. In countries where the demand for home ownership is colossal, robust domestic markets have developed. Economies of USA and UK heavily depend on mortgage finance.

In the USA, borrowers obtain the mortgage finance by submitting a Loan application in conjunction with documents related to borrower’s credit or financial history to the bank underwriter. Alternatively, borrower’s can submit the same documents to a mortgage broker, who then assess the information and provides the borrower with best possible options of financing the mortgaged property. Often, unsuspected borrowers fall prey to unscrupulous money- lenders or brokers en-cash on the borrower’s plight and work the situation to their advantage, while eliminating the mortgage responsibility on the property and force the property owners into foreclosures.

Lenders take into account key factors that influence their decisions regarding lending to a borrower. These factors include credit report, outstanding credit, credit card accounts, down payment, income, interest rates, available funds and debt to income ratio. In addition, supply & demand, interest rates, demographics and economic growth relatively influence the mortgage industry.

Mortgage loans are available to borrowers at Fixed and Adjustable interest rates.

Regardless of national interest rate change, fixed interest rates remain unchanged. Used as part of an introductory offer, usually they are replaced by higher fixed rate or variable rates upon successful completion of six months of the loan duration. The alternative to change a fixed interest rate is through refinancing – getting a lower fixed rate or variable rate on the new loan agreement. Fixed interest rate provides a security against elevating national rates, borrowers are an advantage of paying a comparatively lower are, if locked for a lower fixed rate than the current national rate. It makes budgeting easier, if succession of loan payments is unequivocal. However, the disadvantage lies when the national rates have pulled down, borrowers end up paying a higher interest on their mortgage loan.

Variable rates in contrast fluctuate in response to changes in national rates. It is directly proportional to the national rates, hence when national rates pick up; variable rates increase and when they decline so do the variable rates. It’s the most common type of interest rate used for small loans and credit cards. With variable rates prediction of lump sum payment is difficult, it could increase up to several times than the payment that could have been made in matter of few months. However, monthly payments remain fixed and the final payment may be a different amount due to the fluctuating interest that has been accrued over the loan.

Fixed and variable interest rates are popular when dealing with mortgage finance, though there are other types of loans like balloon loans and government backed loans that offer both types of interest as well.

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Mortgage Finance FAQ:

Question: If I just refinanced my home mortgage, can I finance a new investment property soon after?
I just refinanced my home last month and got a much lower rate and payment. Of course, this means my mortgage was paid off and a new loan was initiated. Does this affect my credit in a way that would hamper me being approved for a mortgage on a new investment property?

Answer: Yes it could. Basically the bank is going to review your credit with the house that you just bought taken into consideration. The banks may ask you for a bigger % as a down payment because it is considered an investment property. If you have everything lined up and your debt to income ratio is where it needs to be then you should be fine in buying another home. If you don’t have the $ for your down payment or if your past your ratio then the bank will see that your too much of a risk to lend for a second home.

Question: Is it possible to get the mortgage company to finance the remaining balance of the sale price?
I would like to know if I sell my house for less than I owe ,would my mortgage company accept that I payoff the remaining balance over the years,without hurting my credit? I have 80/20 mortgage.

Answer: You can not sell a property until the mortgages against it are settled, that’s how the loan is secured & trying to do so can constitute fraud. In today’s economy however, settling a mortgage for less than what is owed, or a “Short Sale” is entirely possible. Talk to your lender and see what they are willing to do; if you’ve never been late on payments, etc. then they should be more than willing to work with you. As far as paying off the remaining balance over the years, not likely to happen. Banks generally to do not loan without collateral, especially with the foreclosure rate as high as it is.

Question: Does anyone know of any mortgage companies that will finance someone with a low credit score?
I keep looking but I can only find sites or companies who seem like they might be a scam.

Answer: Be careful of scams. You need to stay away from anything online since the scams are rampant. You don’t want to give any of these sites your personal information. You could easily have your id stolen years down the road – when they figure you’ll have better credit. Or they will charge you upfront then turn you down, keeping the fee.

Visit every single bank and credit union in your area. No fee for this. If they are turning you down then everyone else will. Stay away from the big banks as they are not lending as much.

Question: Question about an owner finance mortgage.?
Let’s say that you owner finance your home. At the time of closing, the house is deeded into your name, listing you as the owner.

You later find out that the person you are owner financing this through actually has his own mortgage on the house. Basically, you are paying your mortgage to him, who is paying his mortgage to a lender.

This doesn’t sound legal to me. Does anyone know the laws regarding this?

Answer: Wow. Your Title Search, Title Insurance and the closing agent would have picked this up. So, I am guessing you skipped those protections? The seller is committing mortgage fraud. You can sue him, but you don’t own the house, his mortgage company will probably end up with it. You need a lawyer with real estate experience. Call a local Title/Abstract Company and ask for a couple references to lawyers. The seller’s mortgage would have been paid off at Closing had you gone through a proper closing.

Question: My father died and left me the house, and their is a mortgage on the house should I get in financed in my name?

Answer: It is more important to make sure the title deed is in your name. If you would have to go through probate to make sure the property is placed in your name then you should do this as soon as possible, even if their is only one heir and that being you.

Even if there is a will, the will would have to be probated. If there is some type of trust then you might be in a different situation. If there is a trust you might avoid probate.

Some states do not require probate if the entire estate is less than a certain amount. You would have to find out the probate laws in your state and if there is a limit on going through probate. A probate attorney would be able to assist you in telling if you would have to go through probate.

Normally you would be required to transfer the mortgage to your name through an assumption of the with current mortgage company or refinance the entire mortgage by paying off the current mortgage.

Now saying that I have not known a single mortgage that has ever foreclosed on a property as long as the monthly mortgage is being paid on time.

Question: Do you think a family with an income of $95,000 could finance a mortgage for a house worth $2,400,000?

Answer: Not unless you had a HUGE down payment. Your income wouldn’t be enough to make the payments with 20% down.

Question: Which type of lending institution is better for a home mortgage; a mortgage company or traditional bank?
I’m not a first time home buyer. What are the pros and cons of using bank financing versus mortgage company financing to find the most competitive interest rates? This is for a home purchase, not refinance and my credit is excellent.

Answer: In terms of competitive rates, your bank is limited to the loans that are in the bank, as opposed to a mortgage company who will have thousands of options to fund your loan.

The pro’s of a local bank are the personal contact and you can build a relationship with them, which will encourage repeat business and you will then be able to get better rates from them

As an investor I want to keep my funding as local as possible, find the banks that have very few branches and the want to give me business, as opposed to national banks or brokers that I am only a number too.

Question: How can I report a seller financed mortgage to a credit bureau?

Answer: The seller would have to be a subscriber to the credit bureaus. This costs money, and so, unless you are paying the monthly fee, I doubt they would do this on their own.

Now, if you are doing a rent to own type of deal, what you can do is have the seller keep records or you can of how you paid your rent. You can show this to the lender when you go to get a mortgage on the place.

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Categories: Mortgage Financing
6Jun

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