There are thousands of non-profit housing counseling agencies that are certified by the U.S. Department of Housing and Urban Development (HUD). Counselors will work with homeowners to help them prevent a foreclosure or get back on track with paying their mortgage. Most of the services are free for struggling homeowners. Get more details on HUD housing counseling agencies.
Amortization. Each mortgage payment is split so that part goes to paying the principal and the rest goes to interest. In the early years of your mortgage, interest makes up a greater part of your overall payment, but as time goes on, the principal becomes a larger portion because you have a smaller amount of principal to charge interest against. Your lender will provide an amortization schedule (a table showing the breakdown of each payment).
When you apply for a mortgage loan in the US, you will typically deal with an underwriter. Most underwriters work for banks, but you can also choose to work with a brokerage. Mortgage brokers don't provide loans directly, but have relationships with a number of lenders. Regardless of the type of underwriter you work with, you will typically be required to:
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Your real estate agent is a vital and important partner in finding and buying your next home, but it’s important that you choose your lender rather than blindly going with who your agent recommends. The reality is sometimes there is a financial tie between your real estate company and the lender it refers. In this case, as always, it’s important to closely compare rates with other lenders. Family and friends who have recently purchased a home, as well as trusted professionals who work with lenders can help steer you in the right direction. If you find a lender that wasn’t referred by your agent, ask your agent to do a quick phone interview with the lender to be sure you’re not missing anything.
Conventional loans require a home buyer to make a 20 percent down payment and many home buyers don’t have enough cash on hand to make that down payment therefore they are required to pay for mortgage insurance as part of their monthly payment. This insurance protects lenders if a borrower should default on the loan. Until late 2014, Fannie Mae and Freddie Mac required down payments of at least 10 percent. This requirement pushed many home buyers into Federal Housing Administration loans or FHA loans, which have a 3.5 percent minimum down payment. The problem is that FHA premiums are costlier than private mortgage insurance. But in 2015, qualified buyers will be able to get Fannie and Freddie backed mortgages with down payments as little as 3 percent. These premiums will be dependent on credit scores and the size of the down payment. Private mortgage insurance premiums are generally more affordable than FHA premiums.
Union Plus Mortgage Assistance provides interest-free loans and grants to help make mortgage payments when you're disabled, unemployed, furloughed, locked out or on strike. If you qualify for the Mortgage Assistance loan benefit, you’ll also receive a one-time grant of $1,000 paid directly to you (Note: if you are applying due to a furlough the one-time grant is $300). The program has provided over $11.2 million in assistance to union members.
A third option – usually reserved for affluent home buyers or those with irregular incomes – is an interest-only mortgage. As the name implies, this type of loan gives you the option to pay only interest for the first few years, and it’s attractive to first-time homeowners because of the low payments during their lower earning years. It may also be the right choice if you expect to own the home for a relatively short time and intend to sell before the bigger monthly payments begin.
Coming up with a down payment can be the one of the biggest obstacles for first-time homebuyers. It can be challenging to save for a down payment, even if you have a steady income and decent credit score. But with the right planning and budgeting, you can reach your savings goals faster than you think. If you aren’t able to make a sizable down payment, another option is to use gift funds from a relative. As long as the borrower has 5% of their own money, gift funds can be used for the rest of the down payment. It’s also a good idea to talk to your lender to see if you qualify for down-payment assistance. Knowing what your options are and how much you will need to save before you start the process will help prevent any surprises along the way.
Once a Servicer is notified that a borrower is conditionally approved for mortgage assistance from a HFA, they must not refer the mortgage to foreclosure or schedule or conduct the foreclosure sale for 45 days. (Foreclosure actions are suspended unless the HFA notifies the Servicer the borrower has been determined ineligible for assistance.) Servicers must suspend the foreclosure referral or sale for a longer period of time if it is required by state law. Servicers may also postpone a foreclosure referral or sale exceeding 45 days if needed to facilitate the processing of mortgage assistance and receipt of funds, provided the Servicer follows up with the HFA on a regular basis to determine:
Insurance: This will be paid to a homeowner’s insurance company of your choice; this is required when you have a mortgage. Lenders require that your insurance cover the cost of rebuilding the home if it is ruined by fire or other disaster. This “replacement cost” is determined by your insurer, and must be agreed to by your lender. Insurance will typically cost $700 to $1,200 per year for a single family home.
Your credit score can make a big difference in how much home you can afford and how much interest you'll end up paying. For example, if you're obtaining a $200,000 mortgage and have a FICO score of 750, you can expect to pay $138,324 in interest over the term of a 30-year mortgage as of this writing. On the other hand, with a score of 650, you can expect to pay almost $35,000 more. MyFICO.com has an excellent calculator that can tell you the cost of your credit score. Before you start the homebuying process, it can be a good idea to check your credit report and FICO score and to do damage control if necessary.
Example – A $200,000 five-to-one-year adjustable-rate mortgage for 30 years (360 monthly payments) starts with an annual interest rate of 4% for five years, and then the rate is allowed to change by .25% every year. This ARM has an interest cap of 12%. Payment amount for months one through 60 is $955 each. Payment for 61 through 72 is $980. Payment for 73 through 84 is $1,005. (Taxes, insurance and escrow are additional and not included in these figures.) You can calculate your costs online for an ARM.
Tax benefits. The tax code currently provides tax benefits for homeownership. You may be eligible for a deduction for the interest paid on your mortgage, private mortgage insurance premiums, points or loan origination fees, and real estate taxes. And when you sell your primary residence, you may be able to exclude all or part of your gain on the sale of your home from taxable income.
To qualify you for a conventional loan, your lender will consider whether you have stable and reliable income. It may require copies of paystubs, W-2s, income tax returns and other documentation to make an assessment. Frequently changing jobs will not necessarily disqualify you for a conventional mortgage, if you can show that you’ve earned a consistent and predictable income.
Many real estate agents want you to be pre-qualified for a loan before they will start to work with you. The mortgage pre-qualification process is fairly simple, usually just requiring some financial information such as your income and the amount of savings and investments you have. Once you are pre-qualified, you will have a better sense of how much you can borrow and the price range of the homes you can afford.
*Keep Your Home California works directly with California’s Employment Development Department to determine a homeowner’s employment status. If it is determined that a homeowner’s unemployment benefits were terminated because they became fully re-employed at any time during the eighteen (18) month Unemployment Mortgage Assistance benefit period, and the homeowner failed to notify Keep Your Home California as required, Unemployment Mortgage Assistance benefit payments will be terminated immediately.
This is the number of years during which you will be making payments on your mortgage. The most popular mortgage is a 30-year fixed, with 15-year fixed coming next. Common terms for fixed mortgages are 15 and 30 years, but some banks offer mortgages in other five-year increments from 10 to 40 years. Stretching out payments over 30 years or more will mean that your monthly outlay will be lower, but the overall cost of your home will be more because you’ll be paying interest for more years. To make your home cost less, choose a shorter term, such as 15 years.
Find information on mortgage assistance and foreclosure prevention programs from various companies, federal government agencies, non-profits, HUD counseling agencies, banks and states. Numerous organizations have pledged to provide loan modification and other forms of mortgage help to millions of Americans. Resources are available that can help prevent or stop foreclosures as well as assist homeowners with paying their current and back mortgage payments.