Spare Dollars » Home Loans

The Impact Of Debt On Getting A Mortgage

Jeff W — Wed, 01 Sep 2010 01:42:39 +0000

The Impact Of Debt On Getting A Mortgage

When lenders are looking at applications for mortgages, they consider a client’s credit history. Moreover, they consider the debt to mortgage ratio which determines if a borrower is likely to default on the loan. If you have many debts, the interest rates that the lender will offer will be higher compared to the ones that are offered for those borrowers who have no debt. The origination fees are also higher if you are in debt and you are looking for a mortgage. The debt that you have can also affect the down payment that you are required to put on the mortgage.

If you are looking for a mortgage and you are deep in debt, one of the best things you can do to avoid the high interest rates is to get out of debt as soon as you can. One of the best ways to get out of debt fast is by using debt consolidation services. During debt consolidation, all your debt payments are combined into one and you are able to make a single payment at lower rates. When it comes to debt consolidation part of the debt can be forgiven and the repayment terms can also be extended. Lower debt payments make it easier for you to make a down payment on the mortgage.

It is still possible to get a mortgage even when you have a lot of debt but this will depend on the monthly payments that you can afford to make. The lender will look at your monthly income and then determine if you can pay a minimum of $1000 each month for your mortgage. A large down payment makes it easy for you to get a house.

If you have filed for bankruptcy in the past, most lenders will advise you to wait for at least two years before you can apply for a mortgage because this makes it easier for you to get financing. This two year period also gives you time to make several payments on time so that they can be included in your credit report. This is very important because the lenders will look at the payments that you have made and whether they were made on time. You need to have at least 3% to 5% of the entire mortgage to put down when you apply.

If you find it difficult to come up with the down payment yourself, you can ask your family to help you out. Once your new home has been financed, it is easy to take out a second or third mortgage on it in order to pay back the money that you borrowed from your family.

For those who find it difficult to borrow money from family to get a mortgage, you can also get help from various programs that assist individuals to come up with down payments for a mortgage if they are debt. In some cases, you can use programs that offer grants and this is an advantage because you do not have to pay the money back.

The Impact Of Debt On Getting A Mortgage

How to Pay Off Debt Fast: Paying Off Mortgage Debt

Jeff W — Fri, 22 Jan 2010 11:00:09 +0000

How to Pay Off Debt Fast: Paying Off Mortgage Debt

The next in our series on how to pay off debt fast is one most of us know all too well: the dreaded mortgage payment. Paying off debt is important in order to save money and avoid paying large sums in interest. By paying off mortgage debt, most people can save considerable amounts of money over what they would pay over the full term of the mortgage loan. Using a mortgage calculator that lets you adjust the interest rate over different pay back periods is a great way to get an overall picture of how much you will ultimately pay at the end of the mortgage period. This may be a big eye opener and an impotence to find a way to pay back your mortgage as quickly as possible. However, before embarking on a plan to pay mortgage debt off early, it is important to determine if this is the best debt to be concentrating on. Those who also have high interest credit card debt or other types of high interest loans should generally focus on paying those off first. As a rule, you should also not neglect your retirement savings plan in order to concentrate on paying off mortgage debt early.

After considering those issues, many people determine that they in fact are able to afford the extra money monthly that it would take in order to pay a mortgage off early. Once the decision is made, there are some guidelines and methods to keep in mind and to help you reach your goal.

One of the easiest ways to pay off mortgage debt is to make monthly principle payments. These payments will go directly towards the principle of your mortgage debt, allowing you to lower the amount owed on your mortgage much more quickly than if you just made the regular monthly payments. Adding just a little extra each month towards the principle can reduce the mortgage loan amount faster than you would think. Of course, before you start making principle payments, make sure that the lender allows these types of payments to be made without there being penalties involved.

If you cannot afford to pay any extra money towards your mortgage on a monthly basis, try to plan to make one extra principle payment each year. This can be especially easy if you plan this around tax refund time, or if you get a yearly bonus at work. Applying this extra money on a once-a-year basis can help you pay your mortgage off quicker. In fact, many people manage to pay mortgages off early simply by paying towards their principle whenever they receive a chunk of unexpected money. You might also want to investigate going on a bi-weekly payment plan if your lender offers one, as this equates to 26 payments each year instead of only 24.

If you absolutely do not have any extra income to put towards your mortgage, consider taking a part-time job, at least on a temporary basis, and earmark your entire part-time earnings towards paying off your mortgage. This can be a quick way of paying down a mortgage fast, without denting your existing budget.

How to Pay Off Debt Fast: Paying Off Mortgage Debt © SpareDollars.com

How To Pay Off Your Mortgage Faster

Jeff W — Wed, 20 Jan 2010 11:00:16 +0000

How To Pay Off Your Mortgage Faster

For most of us buying a home is the biggest financial decision we will ever make so it goes without saying that before we sign our name on the mortgage paperwork, we should do a good deal of research to not only find the lowest rates and the best terms, but we need to also determine how to pay off your mortgage faster so we can establish more equity in our home and eventually be free of a mortgage payment all together. This article contains a few tips on how to pay down your mortgage faster and help keep more money in your pocket.

Increase Your Monthly Mortgage Payment

Increasing your mortgage payment each month can not only speed up your mortgage payoff significantly but it will reduce the amount of interest you pay every month on your mortgage. Without confusing the topic with specifics and numbers, the bank charges you for every day that your loan is outstanding, and is typically calculated over a period of 30 years. If you pay back the bank sooner, in 20 years for example, the bank will charge you only for 20 years worth of interest rather than the full 30 years worth. On a mortgage loan of hundreds of thousands of dollars you can save tremendous amounts of money over the course of the loan.

Make Biweekly Mortgage Payments

Biweekly mortgage payments are confusing to some people, but they are really quite simple. Each day your loan is outstanding the bank charges you for interest, and every time you make a payment the amount of principle you owe is reduced by that amount. When you make normal monthly mortgage payments you pay 30 days worth of interest, but when you make a payment every 15 days your principal amount is that much lower at the end of the month, meaning the bank will charge you much less in interest over the long term. It doesn’t sound like much but paying your mortgage biweekly can save you tens of thousands of dollars over the life of your loan. The downside to paying biweekly however is you need to be sure you have enough cash on hand to make your payment every two weeks and this can be a challenge to some homeowners living paycheck to paycheck.

Refinance Your Mortgage Whenever Possible

Over the last few years mortgage rates have reached record lows and if you haven’t looked in to refinancing your mortgage you could be flushing away thousands of dollars. Over the life of a 30 year mortgage, interest amounts to nearly two to three times the value of your home, depending on your interest rate. If you have an opportunity to lock in a lower rate and cut down the amount of interest you pay youd be crazy not to. This is doubly true if you have a variable rate mortgage and plan on staying in your home for a long time. To be fair however, refinancing your mortgage isn’t for everyone though, if you don’t plan on staying in your home for a long period of time the amount the bank will charge you to refinance may not be worth the potential interest savings you will gain by doing so. Be sure to ask your mortgage agent for an amortization schedule before and after the refinance and make sure that you will be saving more than the bank will charge.

As you can see there are a number of ways to pay off your mortgage faster, most of which involve paying more money down toward the principal every month and/or cutting down the amount of interest you pay. Cutting a quarter of a point off your mortgage rate doesn’t sound like a lot but when applied to a $300,000 mortgage and taken over 30 years it can save you over $17,000 worth of interest. I’d say $17,000 is enough motivation to learn how to pay off your mortgage payment faster wouldn’t you?

How To Pay Off Your Mortgage Faster

How To Raise Your Credit Score

Jeff W — Tue, 19 Jan 2010 13:00:30 +0000

How To Raise Your Credit Score

So you want to know how to raise your credit score? In short pay all of your bills and make sure you pay them on time every time. I know this sounds overly simple but it really isn’t. To better understand the best way to raise your credit score, lets understand exactly what your credit score is.

What Is A FICO Score?

Your credit score is based on a system developed by a company known as Fair Isaac Corp, which is where the term FICO score comes from. The system calculates a lot of different factors like how long you’ve had credit established, how often you pay your bills on time, what kind of outstanding balances you have on loans and credit cards, along with a lot of other factors.

Your FICO credit score ranges between 300 and 850, with 300 being the lowest and 850 the highest. The higher your credit score the more likely it is that lenders will give you their preferred rate. Having a higher credit score can save you hundreds of dollars a year in interest on mortgages, car loans or anything else that might base your interest rate or payment structure on a credit score.

Get Credit Established Early

When you have something bad happen like missing a payment your credit score will take a hit, however the longer your credit history the lesser the impact that it will have on your credit score. So for example, if you are a young person who has only had credit for a short time and you already missed a payment or two then it is apparent that you arent responsible with your money and your FICO score is going to reflect that. On the other hand if you have had a spotless record for 18 years and you suddenly miss a payment, your score wont take as great of a hit.

Keep Your Oldest Credit Card Active

Having established credit cards is very important to your credit score. When you have had a banking relationship with a credit card company and they are happy with you it shows that you are responsible with your money and you have made a good effort to make your payments on time.

Keep Your Available Balances Low

If you have many credit cards it is a good idea to keep your available balances as low as you can get away with. Even if you have your balances paid off completely your available balance is considered. Look at it this way… if you have four cards with $10,000 available each then credit companies still see you as having the potential to run up $40,000 in debts after they loan to you. This is a risk for the company to take on and they need to accommodate for this risk by charging you a higher interest rate. By keeping your available balances lower you can help eliminate this risk.

Always Monitor Your Finances

This last point is perhaps the most important (aside from paying off your bills of course). You need to monitor your credit as often as possible. You’ve heard commercials offering credit monitoring service to help protect you and your score. These companies are definitely helpful, but whether you need to pay for a service is up to you depending on how much you are willing to do yourself. By law you must be allowed to check your credit score for free once a year and I highly recommend that you take advantage of this. Check to make sure that you recognize all the accounts opened in your name, and if you don’t you need to contact the issuing credit agency to rectify this.

Bottom line, taking care of your credit score is one of the most important things you can do for your financial future. Just a few points on your score can make the difference between locking in the top rate and paying hundreds or thousands of dollars in interest payments.