What credit crunch

Last week, we touched on the topic of the mobile home refinancing loan. We discussed its basics and two major types. Now, we will elaborate on the different kinds of accommodation areas and campsites for mobile homes.

There are many different campsites where one can build or settle their mobile home. A mobile home refinancing loan may be used in any of these accommodation areas. Here are a few:

• Trailer park - A trailer park is a neighborhood area or land where travel trailers rest. It may also mean “mobile home park” or a community of manufactured homes in a specific lot area. It is common to have mobile homes in trailer parks as permanent residences.
  • Emergency trailer park - These are trailer parks created to help those affected by disasters. Displaced victims are invited and allowed to settle as long as necessary.
• RV park or caravan park - People with recreational vehicles or caravans may park in these campgrounds either overnight or longer but with contract. They are allowed to stay in spaces known as pitches, which have different facilities to plug in. These include drinking water, sewage, AC power, television, telephone and hotspot or Wi-Fi connections.

For any of these types of accommodation areas, a mobile home refinancing loan is helpful if you plan to stay for quite a long time.

Getting a mobile home refinancing loan means exchanging an existing mortgage for a new one, usually with better rates of interest and better payment terms. A mobile home is still considered real estate. Hence, you have just as any right to refinance a mobile home as you can on any other type of home or real estate property, no matter what kind of accommodation area you choose to construct it on.

Mobile homes, also known as trailer homes or static caravans, are movable houses usually placed in one location and left there permanently. However, because of the way they’re built (with wheels and tow-hitches), they can also be moved to a different site when the occasion calls for it, such as relocation or moving to a different trailer park. As such, they are categorized as real estate, and can be given real estate and refinancing loans.

A mobile home refinancing loan consists of two types: 1) loans provided for the mobile home itself, and 2) loans provided for the mobile home and the land on which it set up.

Loans provided for the home itself supply money for the construction of the home, including the money needed for the required building materials. However, they do not provide for other charges, such as transportation and involved taxes. This kind of mobile home refinancing loan is usually taken by people who live in mobile home community parks, or places with temporary arrangements.

A mobile home refinancing loan provided for the home and the land is comparatively easier to obtain. However, the loan amounts are significantly higher, since the price for the land is included. Still, taxes involved are not provided for by this type of loan, either.

Next week, we will discuss the requirements regarding mobile home refinancing loan types, as well as the different kinds of accommodation areas and campsites for these mobile homes.

California home loans have been seriously hit by the national housing crash. But now, there is good news for those who are intending to buy homes in California: houses are starting to sell once more!

Investors and first-time homebuyers are getting foreclosed houses in Los Banos City, where the number of local sales went up almost five times compared to this time last year. According to the National Association of Realtors, there are signs that even the most damaged of markets are starting to recover already.

If you go online to search about California home loans or stumble upon these articles on Internet news, don’t be surprised to find out how fierce the competition is. It’s best to know what factors to consider when obtaining home loans in California.

These factors are the following:

• Loan type – There are several types of California home loans, classified according to terms, rates, and use. Do research on these before closing any deal.
• Trusting your mortgage company – Times are hard, and fraud is quite common these days. Do go to companies who have established names, rather than “secure” companies who turn out to be con artists.
• Pre-qualified loan approval – This is only possible if you submit all documents required, have a stable source of income, and a great credit score. Else, you have to apply first, and then wait for the lender to contact you about your status.
• Approval time – Know the maximum approval time a company takes to process your application. Remember: the sooner, the better.
• Closing costs – Finally, make sure they provide details on closing costs such as fees and commissions in connection with your home loan and purchase.

The national economy has been dwindling, people’s credit scores are falling, and home loan companies have been failing or even disappearing completely. This situation has left many house buyers no choice but to look for other ways to pay for their dream home.

A jumbo loan, or a non-conforming loan, is a type of home loan that does not follow the rules established by Fannie Mae (Federal National Mortgage Association or FNMA) or Freddie Mac (Federal Home Loan Mortgage Corporation or FHLMC). Instead, a jumbo loan exceeds the limits and guidelines that Fannie Mae or Freddie Mac requires for loans they’re willing to buy from original mortgage sources.

Jumbo loans are a small percentage of home loans. This is because this type of home loan is seen as a high-risk loan to most lenders. Also, new conforming loan limits are set January of each year, and the jumbo loan amounts are based on those new limits, which may vary per state and per property unit.

If you are planning on financing a house that can be a little bit more costly than a regular house, or if you live in the state of California where home prices are significantly higher than normal, then a jumbo loan is something you should consider.

The internet is filled with many websites that offer jumbo loans, but be wary. Do not get tricked by offers, such as being given the lowest interest rates possible. The lender might charge you for other fees that you might not know about until the end of your loan. As a precaution, always do a comparison of quotes from different lenders to see which company can offer the best jumbo loan for you.

An FHA loan is not a loan distributed by the Federal Housing Administration (FHA). In truth, an FHA loan is a program that insures home loans, and does not fund your home loan. What the FHA does is provide mortgage insurance to help homebuyers. This way, people who don’t usually qualify for loans, such as lower-income Americans and those with poor or no credit, can purchase homes.

FHA loans are great for people who want to buy a house with a small down payment. Right now, the down payment for FHA loans is only 3%, but come January 1, 2009 the down payment will be 3.5%. That’s still reasonable for those who fall in the low-income bracket.

In fact, even those with no credit at all yet (or zero credit) can receive a loan using the FHA loans program. This is one of the main reasons why people who normally think they don’t qualify for a mortgage turn to FHA loans instead.

These reasons make FHA loans the first choice for first-time homebuyers. The FHA allows a higher debt-to-income ratio, and because the down payment is incredibly low, people with little savings can still afford to purchase one that they like. It’s better than wasting it on paying rent for a house they can barely call a home. FHA loans are also okay for those who have higher incomes. There is no maximum income for qualification, but it also depends on certain counties.

First-time homebuyers should seriously consider FHA loans. Not only will they have enough time to prepare for future mortgage payments, they will reap the benefits of being in a home early in the program, too.

If you keep reading the names Fannie Mae, Freddie Mac and Ginnie Mae on mortgage and home loan articles, chances are you might be clueless as to “who” they are. But in reality, these names do not pertain to people—they are actually shortened names for large institutions.

“Who” are they?

These three, Fannie, Freddie and Ginnie, are the three big institutions that buy the majority of mortgages for all homes across the nation. They set some regulations and guidelines for lenders to follow so consumers can avail of lower risk loans. Many recent foreclosures have caused these guidelines to become a little bit more strict than usual, and that more documentation is required to close a loan.

How to they work?

Fannie, Freddie and Ginnie, or the “big three” are what you call secondary market lenders. Often, many retail lenders actually receive their funds from a secondary market lender. These secondary lenders have assisted the national mortgage market by allowing money to flow easily from one state to another. The movement of these loan funds helps in avoiding situations where mortgages are only available in certain areas, cities or states. This is to benefit everyone who are in need of loans, no matter where they reside.

Mortgage lenders sell your loan to another company which sells it to one of the big three, or sometimes the lender you got your loan from itself does that. In turn, Fannie, Freddie and Ginnie buy “pools” of loans which get grouped according to size, interest rate and type. The servicer then gets a monthly fee (about 3/8 of a percent) from the institution for doing all the necessary actions regarding your loan and its payments. It may seem small, but when the “pool” gets big enough it can create quite a big amount when sold to any of the big three.

How did they get their names?

The names of these “big three” actually come from their acronyms, pronounced phonetically. Fannie Mae (FNMA) is the Federal National Mortgage Association, Freddie Mac (FHLMC) is the Federal Home Loan Mortgage Corporation, and Ginnie Mae (GNMA) is the Government National Mortgage Association.

Now that you know “who” Fannie, Freddie and Ginnie are, you know you’re in good hands when you obtain your home loans.

Finding your dream home is easy. Buying it, however, may seem out of reach. Thankfully, there are great home loans out there that can turn your dream home into a real home. It’s only a matter of knowing where to look and what to do.

First, you need to know that there are two types of home loans:
1) Fixed rate mortgage, where a fixed rate of interest is applied throughout the entire loan term, making your monthly payments constant and much easier to handle; and
2) Adjustable rate mortgage, where your monthly payments differ with each change of interest rate, and they have lower interest rates than fixed rate mortgages.

Once you get this done, you also need to check if you qualify for a loan. You can even get help from the government if you fit their requirements. There are three kinds of government assisted home loans:
1) Federal Housing Administration loans or loans for low to moderate income buyers by the FHA;
2) Loans guaranteed by the Department of Veterans Affairs or VA which is available to most veterans and service persons; and
3) Rural Housing Service by the Department of Agriculture, or loans for rural residents.

Find out which government assisted home loan works best for you and use it to your advantage.

And finally, as with any other type of loan, weigh all your options and prepare yourself. Look online—scour the net for home loan deals. It helps to collect and compare all the offers you receive from online lenders to know which home loan will work best for you.

Once you’re ready to apply for a home loan, make sure to be ready with the following:
1) Information on down payment options because you’ll most likely be given two choices–pay a big down payment now and pay the rest later, or no down payment but pay bigger amounts later. Know which will work to your advantage.
2) Your employment details because a job earns you money to pay for bills and your loans.
3) Your credit score because a better credit score will most likely get you the better deals out there.

One of the more confusing terms when getting a home loan would be the term ‘prepayment penalty’. Part of the confusion comes from the fact that not all lenders impose a prepayment penalty upon their cardholders.  Despite this, it is still important to be aware of this term, especially if you’re looking to secure a mortgage. Prepayment penalties could have a significant impact in home loans.

So what exactly is a prepayment penalty?

In simple terms, it is a ‘penalty’ given by the lender if the borrower pays off the home loan before a specified amount of time: in most cases, within the first three to five years. That penalty comes in the form of a charge.

This probably doesn’t make a lot of sense to you. Why on earth would a lender want to penalize a borrower for paying off his/her mortgage early? This is because lenders incur expenses by putting up a loan for the borrower; in effect, lenders will naturally want to make sure that they make up for all the expenses they ring up. Ideally, all those expenses would be answered for during the life of a home loan. If, however, the mortgage is repaid too early, such as when a borrower chooses to refinance, the lender could incur losses. The prepayment penalty ensures that the lender earns back whatever cost was dished out to put up the loan.

Prepayment penalties are more common for subprime home loans given to people who have bad credit, are in a lot of debt, or do not have a stable employment. But prepayment penalties may still be issued on borrowers with good credit looking for even better rates. In such a case, a borrower agrees on having a prepayment penalty in exchange for a lower rate by around one-eighth to three-eighths of a point compared to the market rate.

Would agreeing to a mortgage with a prepayment penalty in exchange for lower rates be beneficial to a borrower?

The answer really depends on whatever happens after the home loan is agreed upon. A large factor for the mortgage rate would be based on the market rate. Hence, the ‘lower rate’ that a borrower gets for accepting a prepayment penalty is relative to the current market rate.

If the market’s rates remain the same or rises within the following years, incurring the lower interest rates in exchange for a prepayment penalty would look like a good idea.

If, however, the market rates drop significantly in the next few years, the ‘lower interest rates’ the borrower incurred at the time that the mortgage was agreed upon won’t look ‘low’ relative to the new market rate. Ideally, a borrower might want to refinance his/her mortgage to a lower fixed rate and take advantage of the new market rates. But because of the prepayment penalty, the cost of refinancing may be too steep. The borrower, therefore, might not be able to take advantage of the lower rates.

For people who have an adjustable rate mortgage and to desperately need to get refinanced to a lower fixed rate, having to pay the prepayment penalty is not very helpful.

In a sense, agreeing on a prepayment penalty clause on your mortgage limits your options to adapt to changing market rates. For some people, getting a few percentage points taken off their mortgage now in exchange for having a prepayment penalty is a good enough trade-off. But if you are the type who monitors the market rates and always considers the possibility of refinancing, perhaps, you may want to pursue a home loan without a prepayment penalty for the sake of keeping your options for the future open.