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Fannie Mae to help military families with mortgage loans

September 27th, 2010

Fannie Mae is offering help to military families struggling to make their mortgage payments. The programs will help struggling military families avoid foreclosure by offering a forbearance of up to six months if an active-duty service member dies or is injured, creating a financial hardship for their family.

Mortgage loan help

Fannie Mae is also creating a hotline for military families to call if they need help with home loans. If you need help staying out of foreclosure, the number for the hotline is (877)MIL-4566. Mortgage loan specialist will discuss your options for getting help with a mortgage loan.

Jeff Hayward, Senior Vice President of Fannie Mae’s National Servicing Organization, said in a statement:

The men and women of the Armed Forces have shown extraordinary commitment to our country while facing unique challenges as a result of their service. No family impacted by a death or injury in the line of duty should have to face the additional burden of foreclosure as a result of the hardship. We want to do all we can to provide support to these families at a time of need as we honor their sacrifices and service to our country.

Help for families

Families who seek help with their mortgage and receive a forebearance, also will have credit bureau reporting suspended during that time. That will allow them to recive assistance without having it negatively impact their credit.

Many military families struggle financially, especially when one spouse is deployed overseas. Others, faced with multiple relocations, end up with high levels of debt. In some cases military families rely on credit cards and payday loans to cope with bills, escalating the cycle of debt. In 2007, a law was passed to cap interest rates on payday loans at 36% for members of the military.

To complicate matters, some new veterans have difficulty finding employment. The unemployment rate for veterans is about 14.7%, according to Daily Finance, compared with 9.6% for the entire U.S.

Should you get a mortgage to invest in real estate?

September 17th, 2010

Low mortgage rates and affordable home prices have many people wondering if now is the time to invest in real estate. Here are some things to consider before you jump into purchasing an investment property.

  1. Do you homework before you even begin to look at properties. Read books, take classes, or join a local real estate investors club to learn the ins and outs of investing in real estate. Watching TV shows about flipping properties isn’t enough. Get all the facts about what it really takes to be successful in this area.
  2. Carefully evaluate your finances to determine if you are ready to get into this area of investing. Do you have a lot of high-interest debt, loans, or other financial obligations that are eating up your income? If so, it’s a good idea to focus on paying off a significant amount of your debt before moving on to investing.
  3. Do you need a mortgage to buy an investment property? Talk with mortgage lenders who offer mortgage loans for investment properties to see if you can get pre-approved for a loan. If you currently have too much debt, little savings, or other financial issues, you might not qualify for a mortgage.
  4. Learn how to analyze a property you are interested in to see if the numbers make sense. The goal for investing in real estate should be to earn money, not to lose it because you didn’t thoroughly evaluate a deal. Not understanding the terminology involved with investing in property will keep you from excelling.
  5. Put together a team of professionals who can help you reach your investing goals. At the least you should have a qualified attorney, home inspector, appraiser, and real estate agent who can help you close on deals. It’s also important to line of financing with a mortgage lender ahead of time so you can move quickly when you find a property to buy.
  6. Decide whether you want to buy and hold properties, or flip them for a profit. The buy-and-hold strategy is a good one if you don’t mind being a landlord. Also, although it may seem exciting to flip homes, the current real estate market may not allow your to sell an investment property as quickly as you want. Be prepared to continue making payments on a mortgage loan longer than expected if you can’t sell.

Investing in real estate has made fortunes for people throughout history. But make sure you understand exactly what you’re getting into before purchasing a property so you don’t have buyers remorse or ruin your finances by getting a mortgage you can’t afford to pay.

3 ways to cut your mortgage costs

September 10th, 2010

Buying a home is probably the biggest purchase you’ll ever make. Like most people you probably don’t have enough cash on hand to buy a property outright and need to obtain a mortgage loan, which means you are committing to many years of loan payments.

Most mortgage loans are set up to be paid out over a long period of time, such as 30 years, and the interest payments result in paying a whole lot more than the actual purchase price of a property. For instance, if you use a mortgage payment calculator to determine the amount of interest paid on a 30-year fixed mortgage loan for $200,000 at 4.5% interest, you’d pay $164,813.42 in interest over the life of the loan.

Cut Mortgage Costs

So what can you do to decrease the amount of money paid out of your pocket over the life of a home mortgage?

  1. Save up a larger down payment. This probably isn’t the first time you’ve heard this piece of advice, but you really can’t afford to ignore it. Using the scenario described above, assume that the down payment on the mortgage is 20%, or $40,0000. The total amount of interest paid out over the 30 years would be $131,850.74. Boost the down payment to 30% ($60,000) and the amount of interest paid would be $115,369.40. The more you put down the less interest you pay and the smaller the monthly payments are going to be.
  2. Property taxes and homeowners insurance add to monthly mortgage costs. Shop around for the best homeowners insurance policy you can find. Mortgage lenders require insurance premiums to be paid into an escrow account each month. Take time to compare different policies to find the best one for your situation. It may make sense to increase the deductible to have smaller monthly payments. You also may get discounts for being a long-time customer, having multiple policies, or not filing any claims over a certain period of time.
  3. Pay extra toward the principal. Even if you can only spare $50 extra to put toward a mortgage loan each month, do it. Paying down principal faster than the term of the loan can significantly cut your total mortgage bill. If owning your home free and clear of mortgage debt is important, focusing on reducing principal can help.

Refinance to lower payments

Also consider taking advantage of current mortgage rates to refinance out of a high-interest home loan. Decreasing your monthly payments could save hundreds of dollars a month, allowing you to keep more of your take-home pay. You also could refinance and continue paying the same amount each month to reduce principal quicker and cut the total amount of interest paid out over the life of the loan.

Are mortgages with no down payment making a comeback?

September 5th, 2010

Think no-down-payment mortgages are dead because of the housing crisis? Think again. The Affordable Advantage program run by Fannie Mae has allowed some home buyers to purchase a property with only $1,000 as a down payment. The mortgage loan program helps people with moderate incomes purchase homes, and housing grants can be applied toward the down payment.

Four states pilot mortgage program

Only four states are offering the mortgage loan program at this point: Idaho, Massachusetts, Minnesota, and Wisconsin. An article in the New York Times says the Wisconsin Housing and Economic Development Authority has issued 500 loans since March.

While it may seem risky to issue mortgages with low down payments, some housing experts seem to believe that the program’s requirements can cut the risk of homeowners defaulting. Only 30-year fixed-rate mortgages are available through the Affordable Advantage program. Risky adjustable-rate mortgage loans are not available.

Verifying borrower information

Homebuyers must have a credit score of at least 680 and live in the home purchased. Mortgage lenders also must verify the income and assets of home buyers, something that did not always occur before the housing crisis and contributed to a surge in sub-prime lending.

“In addition, we want to see what other lines of credit people have, and their performance. We look at their work history. We call their employers,” Kate Venne, spokesperson for the Wisconsin HFA, told the Washington Independent. The program helps borrowers if they become unemployed. Also, there is no requirement for mortgage insurance, which can bump up monthly fees.

Should you apply for a home loan?

If you live in one of the four states and are wondering whether or not to apply for a home mortgage through the program, here are some things to consider:

  • Are you really ready to take on mortgage payments and other expenses associated with home ownership? In addition to principal and interest, you need cash to cover homeowners insurance, property taxes, utilities, routine maintenance, and home repairs.
  • Would you rather save up a larger down payment to lower your monthly housing costs? Remember, the larger your down payment, the lower your monthly mortgage costs.
  • Do you need to clean up your credit to qualify for a home loan through the Fannie Mae program? Being on time with bill payments, reducing debt, and deleting outdated information in a credit report can help raise your credit score.

Finally, consider whether you are willing to buy a home in this economy. Housing prices and mortgage rates are low, making it a good time to buy a home. But home values could continue to fall even after you purchase a property. Honestly assess your tolerance for risk, as well as your commitment to staying in a home that could decline in value if the economy doesn’t improve.