Mortgage Lowdown

–By Priya Jestin, Staff Writer

The last five years saw an enormous boom in the home equity loan and mortgage lending market. The main reason was that investors sought to build equity in the rising real estate market. There have been benefits, like increased homeownership from this boom. However, it’s not been all smooth sailing.

Home prices have been rising steadily during the last five years. The increase in real estate speculation has helped drive prices to record levels. This, combined with low growth in jobs and salaries, has made many markets unaffordable. The worst was Santa Barbara, California, which was overvalued by nearly 70%.

The huge overvaluation has forced the hands of many buyers, leading them towards dangerous interest-only loans and other risky loans, such as the Option ARM. These loans, which still leave the owners with huge monthly payments, generally do not help reduce the principal of the loan.

–By Priya Jestin, Staff Writer

Shopping for a mortgage that will meet your requirements and will also go easy on your wallet? You’ve probably done the rounds of a couple of mortgage firms. So how about getting comfy while you shop? For starters, you will need to be home for this. All you need to do is switch on your PC and get online.

Shopping for a mortgage on-line has now become one of the easiest and best means of finding the best mortgage available. It involves finding the best price among the different single-lender web sites that price your mortgage. There are numerous benefits of shopping for mortgage on-line.

One of the first things you will notice is that on-line prices are easier to find and to shop. You can easily find and compare different quotes from various sites at the same time.

You will also find that you can get better pricing online than off it. When you acquire a loan through a website, you will often be able to avail of lower prices. This is because online lenders manage to avoid the costs of maintaining retail-lending facilities and they pass on this cost advantage to buyers like you.

Another advantage is that you can avoid getting caught in the inherently volatile mortgage market. Usually, lenders reset their prices every morning. So unless you get price quotations from different loan providers at the same time, you will be running from one to the other. On the Internet, you can be assured that the rates are updated as soon as they are changed. So, you can compare almost immediately and choose the best rate available.

–By Priya Jestin, Staff Writer

Let me confess — I’m tired of my debts. I wish I could pay them all off and be free. I don’t want to pay interest on my home loan, car loan, mortgage… the works. And it’s not like I cannot pay off at least some of my loans. So, why am I cribbing?

Because paying off my mortgage may not be such a good idea after all. Experts say that our home is like a piggy bank. The bank is full with money we’ve already put in. And we can take out this money with a home equity loan or we can put in more by taking an additional mortgage. And if you still think you have enough money to pay off your loan, you could try putting that extra money in a conservative investment.

Planning to sell your home so you can make a gift of the money to your son/ daughter and probably move in with them or near them? Think again. Retirement is an expensive proposition and you may still need the money. Courant.com reports:

Retirement is expensive (and getting more so by the minute), and I really think your parents should bank their $100,000 in case they need it for health costs or other expenses as they age.

Want to know more? Read on

Is your former spouse’s financial misdemeanors haunting you? This is a familiar story: One of the spouses makes a mess of the finances and then the family is forced to go into personal bankruptcy to save assets like their home. Now if you are divorced and you have the house, then you are probably paying the mortgage on the home. But if you don’t yet have the house in your name, and the bankruptcy prevents you from taking another loan, you may be in a bit of a soup. So how do you ensure that the house for which you are paying will indeed be yours at a later date? If your ex-spouse still has the title to the property, then you should get a quit claim deed from him/her. This will show that s/he has relinquished all ownership right to the property to you.

However if s/he refuses to give you a quit claim deed until the time at which you’re able to refinance, you may probably have to wait until such a time. Then, you can have him/ her execute the quit claim deed at the closing on your mortgage. These things can happen simultaneously.

We all know that home prices have shot through the roof and for most of us it is practically not possible to own a home. But it is only when these facts are expressed in figures do we realize the enormity of the situation. Today, the county’s median family would have to spend 54 percent of its income to afford the county’s median home. In 2000, the figure was 26 percent.

And the scariest part is that the scarcity of affordable housing is a deepening national crisis. And this crisis doesn’t cover only for inner-city families on welfare. The problem now affects people in higher income brackets and has even moved to the suburbs. One-third of Americans now spend at least 30 percent of their income on housing. The working poor have it even worse as half of them spend at least 50 percent of their income on rent! Washingtonpost.com reports:

Yet nobody in national politics is doing anything about it — or even talking about it. For most of the past 70 years, housing was a bipartisan issue. In recent decades, its association with urban poverty made it more of a Democratic issue. But now it is simply a nonissue. The current crunch falls hardest on renters in Democratic-leaning cities and metropolitan areas, but Democrats have ignored the issue as resolutely as Republicans. Neither Sen. John F. Kerry (D-Mass.) nor President Bush even bothered to propose affordable housing plans during the 2004 presidential campaign.

Read more: The Housing Crisis Goes Suburban

Guess bad times shadow everyone. I mean until now I only thought about how bad things were for me. A high mortgage rate was just the beginning of a long list of highs. And none of this is going to end anytime now. However, it is not only final consumers like us who are suffering. Latest figures show that that the housing market has cooled off tremendously. Inventories of unsold new homes have gone from four months’ supply a year ago to six months now. That means developers are also having a bad time.

But still at the end of the day, it’s us homeowners who are taking a bigger beating. Our purchasing power has depressed and even if we want to put our homes on the market, I doubt there are buyers who can afford to take them right now. Along with high oil prices, these effects are hurting other industries.

Fine you know how much your mortgage hurts your pay packet every month or how much money your gas is guzzling away. But do you know what percentage of your income should actually be allocated to these expenses? Chances are you probably don’t and are just paying money as and when the charges come up. And believe me, if you are deep in debt, probably is one of the biggest causes is — your inability to budget your income.

It is not enough to pay for services and goods. You should have an idea of how much is enough for housing or transportation. A good budget will even help you know if that home you want to buy will fall within your budget or whether you should go in for a lower budget home. But first you must know how to create a proper budget. Experts across the country agree that most consumers don’t know how to create a realistic budget.

One of the first things you must do is use the percentage method of calculating your mortgage amount. Most people usually allocate amounts subtracting from total income in lieu of percentages. This is quite frustrating. What you can do is use percentages as a guideline. For instance, your rent or mortgage (including insurance and taxes) should be about 27 percent of your income, minus taxes. Your outer limit should be 35 percent. If you are planning to buy a home whose mortgage rate will come to more than 35 percent, you should probably be looking around for a cheaper home.

Remember, even your mortgage lenders uses your gross income to determine how much house you can afford. So if you bring home $50,000, and you want your mortgage to stay at 27 percent, your mortgage should be about $13,500 a year, or $1,125 a month. This percentage is only a guideline and it all boils down to your comfort level.

If you are a senior person, then you probably need to know about reverse annuity mortgages (RAM). These mortgages were created to allow older Americans to tap into the equity of their paid for or nearly paid for home. Homeowners receive a tax-free payment each month, and the mortgage is paid when the home is sold. Bestsyndication.com reports:

One of the first RAM programs was developed by HUD and is still in existence. To qualify you must be 62 or older, live in the home, and have paid off your mortgage. The government will then insure your mortgage. You can also work directly with private lenders. You will want to review their terms carefully to be sure that you are getting the full value of your home and not paying thousands in fees.

Read more: Reverse Annuity Mortgage — Tapping Into Your Equity

Second mortgages and home-equity credit lines are on the upswing in Michigan, as they are across the nation. But here, they come at a dangerous price, as median property values in the state aren’t increasing as they are elsewhere in the United States. Freep.com reports:

The Census Bureau released data for publication today showing that Michigan’s median home values rose 19% in the last five years, compared with a national average of 32%. Meanwhile, 19% of Michigan homes have a second loan on them. Nationwide, 17% do.

Read more: CENSUS 2006: Home owners risking big debt