Mortgage Lowdown

A home to call your own — a dream that just about every American has. So, if you cannot qualify for a mortgage, it is painful. The problem is that people are today willing to do anything that will help them get that coveted loan. Targeting people who badly want a home is a growing industry of unscrupulous people who offer to ‘repair’ your credit scores for a fee. This controversial service has managed to transform a common white lie in the real-estate industry into a full-fledged business, and in the process, has worsened the situation for many people who are already deep in debt.

In Ohio, a growing number of people are turning to them and feeling ripped off. Complaints to the attorney general about credit-repair companies have been on the rise, records show.

New Orleans homes for sale have reached a new peak and the city is reporting an escalating number of residential building permits. These two seemingly conflicting facts suggest that homeowners are accelerating their decisions on whether to rebuild or get rid of their Katrina-flooded homes, the Brookings Institution said recently. Nola.com reports:

In releasing its latest Katrina Index report, the Washington nonprofit research organization gave a sobering interpretation of the home-sales figure: “This may signal the decision made by families to leave Orleans Parish.” But a measure of hope can be gleaned from both home sales and building permits, according to the group’s deputy director, Amy Liu. Together they signal a turn away from paralysis, and sales could improve the rate at which homes are cleaned up and put back into use, she said.

Read more: To stay or go? More people deciding

Almost anybody who has tried to get a mortgage loan knows the importance of having a good credit score. It shows the lender that you are a responsible person and can deal with your loans and repay them on time. Your credit score is based on the perceived risk associated with extending you credit. Credit reporting agencies analyse the risk associated with a borrower before scoring him/her. In this context, a person who seeks credit from many different lenders is riskier than others. So, everytime a lender pulls your credit report, these agencies decrease your score.

So, here’s a bit of advice, don’t overshop for loans. When you do that, if your credit score isn’t too good, it gets worse with every application you make for a loan. Healthywealthynwise.com reports:

While some consumers are ONLY focused on rates, you should seek the guidance of a National Association of Responsible Loan Officers member that is willing to speak with you about your loan options. There are literally hundreds of loan products available and every borrower has a different financial situation and financial goal.

Read more: Home Mortgage Loan Mistakes Most Homebuyers Make

When your credit isn’t too good, the home buying process can be daunting and it can seem almost impossible to buy a home. However, there’s no need to worry, there are a number of steps you can take to minimize the risks involved in purchasing a home. Blackenterprise.com reports:

William C. Johnson Jr., a Washington, D.C., attorney specializing in consumer protection and civil rights, says that many times the allure of buying a home clouds the buyer’s judgment. "When someone wants a home, their wants may override their needs or what they can afford," he explains, adding that a prospective home buyer must consider his or her debt-to-income ratio before buying. "For the most part, a person’s debt level should not exceed 33% of their monthly income, and the mortgage should not exceed 25% of their monthly income."

Read more: Preparing To Buy A Home

So you want to be debt free and want to be lord and master of your own home. Here are a few tips that will help you get there:

• Shorten payment period: Implement this method only if you have enough disposable income with you. Here, instead of making monthly payments on your mortgage loan, you will have to make bi-weekly payments. That this is an excellent method of hastening up the payments can be gauged by its popularity.
• Lump sum: You don’t want to be hassled with maintaining records of bi-weekly payments. No sweat. All you need to do is make payments in lump sums. If you get a bonus at work or money from some other source, you could use it to make lump sum payments against your loan. However, for this method, you need to first contact your lender and find out if your contract allows you to do so. Depending on the contract you’ve signed with your lender, you may only be able to make large payments at certain times.
• Shorten loan period: If you’ve taken a 30-year mortgage but feel that you are earning enough to repay the loan faster, you can shorten it to a 15 year mortgage. But don’t forget, you will have much higher bills.
• Lower the interest: Intrigued? Well you can lower the interest of your mortgage loan. All you need to do if you have a 30-year mortgage is make payments towards the principal amount. That is your funds that were supposed to be paid for interest can go towards reducing the principal amount of loan. However here too, just like before you must talk to your lender and find out if this strategy works for you.

This is an open secret so this survey in itself reveals nothing new — all it does is put this dismal fact in facts and figures, making it even more painful. A national study released recently found that a black borrower is more likely to be charged a high rate. A Hispanic borrower also was more likely than a comparable white to pay a high rate, the study found. Columbiatribune.com reports:

Consumer groups said the study by the Center for Responsible Lending offered the clearest evidence to date that minorities can face widespread discrimination when they shop for mortgage loans.

Read more: Mortgage loan study suggests lending bias

You’ve taken that loan to buy your dream home but are now tired of having to make a big payment every month. You have begun to realize that it is not such a good idea to have a loan balance hanging over your head all the time. You just want to pay off your mortgage as soon as possible. This will help you get a sense of security and freedom.

However, don’t let the temptation overwhelm you. You must be extremely cautions when attempting to pay off your mortgage early. One of the main things you should ensure is that your income is sufficient for you to repay the loan without falling into a debt trap. You should also have money for emergencies. One way you can pay off your mortgage early is by making biweekly mortgage payments instead of making one.

A U.S. appeals court in San Francisco recently ruled that California might force Quicken Loans Inc. to provide refunds to customers under a state law that limited when it could begin charging interest on mortgages. The decision may cost Quicken, the largest Web-based direct mortgage lender, millions of dollars. Reuters.com reports:

Quicken Chairman Dan Gilbert said in an interview that his company may appeal to the U.S. Supreme Court, or lobby California Republican Gov. Arnold Schwarzenegger and the Democrat-controlled legislature to change state lending law retroactively.

Read more: Quicken Loans may face mortgage interest refunds

When you’ve zeroed in on your dream home and just want to buy it before it goes off the market, a mortgage loan comes in handy. You can possess the house asap and pay off the loan slowly. But as time goes by, you begin realizing that it is not such a good idea to have a loan balance hanging over your head all the time. You just want to pay off your mortgage as soon as possible. This will help you get a sense of security and freedom.

However, don’t let the temptation overwhelm you. You must be extremely cautions when attempting to pay off your mortgage early. One of the main things you should ensure is that your income is sufficient for you to repay the loan without falling into a debt trap. You should also have money for emergencies. Dailyindia.com reports:

One way you can pay off your mortgage early is by making biweekly mortgage payments instead of making one payment each month.

Read more: How To Pay Off Your Mortgage Loan Faster