Mortgages in general are not a popular subject to most Americans because they serve as the primary bill each month that sucks up most middle class citizens’ paychecks. There are also a variety of types of mortgages that have different payment options and interest rates. Interest only mortgage rates are an example of a specific type of loan a new homeowner can take out to buy a house.
The interest only loan, despite its name, does not guarantee that a person will only pay the interest on the loan forever because if that were the case, the bank would never be paid in full for the loan. This also doesn’t make sense for the homeowner because they will never be able to own their house outright. Interest only loans work by only paying the interest for the first five to ten years of the mortgage.
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Are you in or facing foreclosure? Has the market value of your home decreased and you’re now upside down? These may be good opportunities to do a loan modification on your mortgage. A “loan mod” as it is sometimes called, is the process of changing the terms of your original mortgage with approval from the lender, and with new laws from the federal government, is not credit based. Losing your job, going from a two income family to a one income family (due to divorce or death of a spouse), being on an adjustable rate mortgage (ARM) where your payments have gone up due to the ARM, or the market value of your home has decreased and you are upside down; these are examples of permanent changes in your finances and may qualify you for a loan modification.
As forementioned, the process’ goal is to modify the original terms of a mortgage agreed upon by the borrower and lender, and may reduce interest rate, reduce monthly payment, modify the length of the loan, or reduce the amount of the mortgage, and many times will include any arrearage placed at the back of your loan. The process starts by you, the homeowner, calling the lender and requesting to do a loan modification.
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Thinking about buying a fixer-upper, but worried about coming up with the money to pay for the construction costs? Or are you wanting to renovate your existing home but just don’t have the available time or money? If so, the FHA may have a program to solve your problems. The section 203(k) program administered by the FHA provides funds to prospective and current homeowners to make repairs and/or do renovation work. A 203(k) loan combines a home’s purchase price and cost of repairs into one FHA mortgage, with only a 3.5% down payment.
A growing number of people are taking advantage of this program, a reflection of the large housing inventory caused, in large part, by foreclosures resulting from the recent economic turmoil. The FHA reports that the number of 203(k) loans taken out in 2008 nearly doubled from the previous year, with 2009 experiencing a 40% year over year increase. Potential homebuyers, attracted by relatively low market prices on foreclosed properties, are often left to contemplate how (and when!) they are going to be able to pay for the repairs once they purchase the house. This is not an uncommon scenario as foreclosed homes, which are often left abandoned, typically need extensive repairs. The 203(k) loan program solves this problem by enabling homebuyers to finance the construction work and start repairs on the home immediately after a loan closing. All residential properties, not just foreclosed homes, are potential candidates for the 203(k) loan program.
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