Mortgage fraud is something you need to be aware of.
This type of fraud can be done by one or more participants in a loan transaction, including the borrower; the loan officer; a real estate agent, the appraiser, a title or escrow representative or attorney.
The Bank is supposed to act as the double check person. As they don’t want to loose customers, these acts often get ignored. At times, lender underwriting no longer has to pull up the “local market analysis values” to compare what similar properties have sold for.
What is Mortgage Fraud?
Mortgage fraud is basically the act misrepresenting or omitting information on a mortgage loan application to obtain a desired loan.
What is Appraisal Fraud?
Appraisal fraud occurs when a home’s appraised value is deliberately overstated or understated. When these appraised embellishments happen, when the applicant or professional wants a higher loan amount. This also happens when a home’s value is deliberately understated to get a lower price on a foreclosed home. Appraisal Fraud may also occur where banks decrease the amount owed on the mortgage in a loan modification.
“Let’s say you own a property that’s worth one million dollars. If you can persuade a buyer that property values are increasing much faster than they are, you may get more money out of the deal. You tell the appraiser “Appraise it for $1,250,000 and it’s worth $25,000 to you!” He does so. You pay him his $25,000 and your net is still around $235,000 to $240,000. It’s fraud. Instead of a distress sale, where you’d be very lucky to break even with a sharp buyer’s agent, you pay the appraiser $25,000 to appraise it at $1.25 million, refinance for cash out to maybe 90 percent of that value, pay the appraiser and walk away with a cool $200k, never making a single payment on the new loan.” Find the Whole Story Here
People who are dishonest with loan applications and are found to be charged with mortgage fraud are prosecuted with penalties of up to thirty years imprisonment. Mortgage fraud is different than predatory mortgage lending, which occurs when a consumer is misled or deceived by agents of the lender. Appraisers that do this are subject to legal penalties in excess of $100,000, as well as discipline where the lenders have the right to decline their appraisals. Not only will their business be hurt, but they can lose their license and end up with jail time.
What can you do as a home buyer or seller?
- Hire your own appraiser- It is well worth the money to know that you have picked out a person who is of your choice. Make sure that your appraiser is state certified.
Credit Rating – How it Affects Your Mortgage
A good credit score is very important if you want to get a mortgage. A good score will help you qualify for a loan and get the best offers and the lowest rates out in the market.
The importance of understanding how your credit rating and mortgages go together will save you thousands of dollars in the long run.
Whenever you apply for a home loan, there will always be an interest along with loan that you are borrowing.
The interest you will pay will be on a fixed rate on the amortizing loan is actually made up of three things.
First, is the amount of money you borrowed.Second, are the terms that go with it and third, the interest rates that is expressed as a percentage. The mortgage rate you have will depend on your credit score solely.
Your credit rating consists of the information about you and practices when it comes to your financial matters. There may be a lot of formulas for calculating your credit score, but the FICO’s formula is the one that is often used the most.
Lenders will include many factors if they are determining your mortgage rate. This will include employment, savings, salary, debts, and many more. The credit score is like the summary of your credit score and it will help in determining the rate you will receive. Here are a few examples of people with different credit score and the credit rates offered to them.
- A credit score of 650= 6.2% rate
- A credit score of 700= 4.8-5% rate
- A credit score of 780-800= 4.6% or lower
The better your credit score, the less risky and a good borrower you will seem to creditors and lenders.
A very good credit score will get you the best rates and lenders will offer you a lower mortgage rate for your home and this also includes more loan choices. On the other hand, a low credit score will definitely cost you a lot. You will be paying more every month and you’ll be spending even more for the loan instead of spending it for something else more important.
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How TO Get Your Annual Credit Report
Do you know what is on your credit report?
Would you know if someone has a mortgage out in your name?
Getting your credit report is the very first thing you need to obtain if you are looking for a home, and also before you set up an appointment with a banking officer.
To get your free annual credit report from equifax online. You can also phone in, where you will be placing your information through an automatic system. You then receive the information by mail 4 or 5 days later. The phone method is less complicated and the Internet gains you immediate access.
Finding The Best Mortgage Rate For You
Most home buyers often find a real estate first to purchase a home and then go about finding the mortgage with which to fund its purchase. However, some experts on the field say that it might be advisable to do it the other way around. Finding the appropriate loan mortgage first; obtain advices from their professional mortgage advisors before finding a real estate company to find the home.
As a buyer, real estate agents will not work with you unless you are pre-approved for a mortgage, especially before negotiating with the seller.
Fixed Or Adjustable Rate Mortgages
There are two types of mortgage rates, which you can apply for a home loan. You can opt for either a fix or the adjustable rate mortgage or ARM. Fix rate mortgage stays constant throughout the term of the loan, so do with your monthly mortgage payments. With a fix rate, you will be able to prepare your budget with ease and you will not have any angst in times of fluctuations in rates.
On the other hand, an adjustable rate mortgage (ARM), will vary over the term of the loan. It can considerably change over time due to boosts in the economy, shooting your payments up or plummeting down into very low rates for economy-related reasons. ARM mortgages are risky, and could leave you owing more than you actually borrowed.
Before approaching banks, it is suggested to prepare your credit score before finding the best mortgage available. Many home owners have opted to pay more on their down payment, which decreases the amount of their mortgage loan and mortgage rate.
Five Tips To Getting A Decent Mortgage
- The Best Mortgage Rates Are With Those With A Significant Down Payment– If you want to receive the best possible mortgage deal, set the goal of getting a mortgage with a significant down payment of 25%. Providing a 25% deposit is the secret to getting the best interest rates. 25% may seem unachievable; but through a carefully structured savings plan, adhered to over several years, it can be reached.
- Shop Around For Rates Don’t Just Settle On Two Offers– After saving a deposit for your home, the next thing is to shop around for the best rates. There are several online mortgage rate calculators that are available, which will allow you to compare lenders.
- Opt For A Shorter Term Mortgage– Shorter term mortgages can make a whole lot of difference to the total money you will be paying in interest. A 15 year period may make your lender more generous to you in terms of interest rates and will certainly dramatically cut the overall interest you pay. If you don’t fit the criteria for a shorter term loan, then consider making extra payments when you have additional cash reserves. Reducing the mortgage principal, will reduce the interest you pay.
Are Student Loans Taken Into Consideration When Applying For A Mortgage?
In order to get a mortgage, you need to have a steady source of income and a strong credit history. If you have student loans, it can make it significantly more difficult to get a mortgage even if you have stellar credit.
Banks are very cautious about offering mortgages in a tough economic climates, and having outstanding student loans in their eyes can make you more of a credit risk.
Student Loan Debt Is a Long-Term Commitment
Student loans are similar to mortgages in that they are for large amounts of money and can take 10 years or more to pay back.
Many mortgage companies do look closer at those who have student loan debt, for they view the applicant as having two long-term commitments during their lifetime.
Student loan debt is notoriously difficult to get rid of. There are limited payment options and often times you end up paying extra interest to pay off the remaining loan amounts. You cannot discharge student loan via bankruptcy like other loans.
Thus, mortgage lenders are hesitant to offer loans to borrowers who have significant student loan debt because they know that you’re stuck with the student loan debt and have no choice but to pay it, even in a financial crisis. Banks also know that that if in a sticky situation, they know you will default on your mortgage, before you default on your student loans.
What Borrowers With Student Loan Debt Should Do
Lets face it, almost everyone has student loan dept. Chances are you do as well. Although it’s more difficult to secure a mortgage if you have student loan debt, it isn’t impossible. The bank wants to be sure that you your debt ratios are in tact according to your income. If you are responsible in your financial dealings makes it more likely you can get a mortgage.
What Can You Afford? Buying Within Your Means
Figuring out how much home you can afford is easier than you think. Calculate your monthly income and your monthly bills, and figure out how much money you need in your emergency fund, financial goals, bills, and what is a reasonable mortgage payment factoring in obligations, and entertainment expenses.
Figure out your it’s always better go to with net income instead of gross income. You don’t take home your gross income; you take home your net income.
For example, if your yearly income is $40,000 a year, you take home roughly $30,800 a year—assuming you have a 23 percent tax rate. That equates to roughly $2,566 a month, or $2,369 on a biweekly pay schedule.
Next, you need to calculate all your bills and miscellaneous expenses. That includes rent, electricity, internet, cable, memberships, subscriptions, phone bills, insurance bills, medical bills, credit card bills, student loan payments,food, gas, and entertainment expenses.
Once you’ve figured out all your bills, subtract them from your monthly income. This tells you how much extra money you have leftover each month and how much money you can reasonably save towards the purchase of your home and your emergency fund.
An emergency fund is essential if you plan on purchasing a home. Unlike renters, home owners have to do all their own maintenance, including cutting the grass and maintaining the yard, fix appliances and deal with unexpected leaks or storm damages.
It is recommended to save between three and six months of their income in an emergency fund. This is to pay for emergencies such as sudden medical expenses, sudden home repairs such as the water heater breaking or the roof leaking, and the sudden loss of income.
Future Financial Goals
It is also important to keep your future financial goals in mind before you sign for a mortgage. You should take into consideration your retirement goals, education goals, and any other financial goals you have before you sign for a mortgage.
Most loan applications require that your housing expenses equate to no more than 33 percent to 36 percent of your gross monthly income. It might be wiser to go with 33 percent to 36 percent of your net monthly income. If you bring home $2,369 every month, 36 percent of your take-home pay would be $782 a month. That’s an amount you should be able to afford for the long term.
There are other things to consider in addition, such as homeowner’s insurance and property taxes. It is important to get those estimates before you consider your balance sheet.
How to Boost Your Home’s Appraised Value Before Refinancing
If you are thinking of refinancing your home, you should be prepared for an appraisal to take place.
Most lenders require an appraisal before they will approve an application for refinancing. Sadly, these appraisals can often make or break a refinance, and low home values can lead to the rejection of your refinancing application altogether.
There are certain things you can do that will boost the appraised value of your home prior to refinancing….here are a couple ideas to consider
Increase the Curb Appeal of Your Home
The outside of a property is the first thing an appraiser will see, so make it attractive. Pay attention to details such as a the roof, driveway, gutters, siding and porch. Think about doing some landscaping in your yard, as this will significantly boost your home’s appraised value. Adding some young trees, nice shrubs, and flowerbeds can all add to the overall look of your home and make it more appealing. Installing solar landscaping lights will improve your homes appearance more than you know. Immediately prior to the appraisal, put your best foot forward to make the outside of your home really stand out in your neighborhood.
Increase Your Home’s Livable Space
Another way to boost your home’s appraised value is to increase the amount of livable space. Since appraisers usually determine a home’s overall value by the amount of livable square footage, giving your home more space can yield great results.
If you have the necessary funds, think about building an addition that includes another bedroom and bathroom, as these are the things appraisers often look for.
Converting an attic into livable space, or changing a porch into an enclosed patio can add to your square footage. These types of projects can typically cost less than building an actual addition, but add to your home’s livable space and appraised value.
Do Some Cosmetic Repairs
Performing some easy cosmetic repairs can also boost your home’s appraised value before refinancing. Paint your home, and invest in some new carpet. Regardless of your budget, there are some things that can be done to boost your home’s appraised value before refinancing. The best thing to do is analyze your situation and decide which improvements and repairs are needed the most. From there you should be able to make visible improvements that will catch the eye of the appraiser.
Best Mortgage Refinance Rates
#1 Shop Around – Any mortgage refinance company that you talk to is going to want to sign you up on the spot, but don’t do that. Take the time to shop around, and evaluate your options.
#2 Always Read All The Paperwork – Always, always, always read every word of the paperwork that you are signing. Promises can be skewed, what matters is what it says in the paperwork. So make certain to always read every single word so that you know what you are agreeing to.
#3 Get Professional Advice – For many Americans, mortgage refinancing documents can be completely and totally confusing. So, you might want to enlist the help of a professional to look over your mortgage refinance paperwork before agreeing to anything. It always pays to get the help of someone who actually knows what they are doing.
#4 Keep An Eye On Interest Rates – The best time to refinance your home is when interest rates are super low, so keep an eye on what interest rates are doing. If the interest rates are super low, chances are they will not stay that way forever.
#5 Get A Fixed Rate If Possible – You never, ever, ever want to get an adjustable rate on your home mortgage if you can avoid it. When you are searching for the best mortgage refinance rates, you will also want to search for a rate that is fixed.
#6 Check Out The Reputation Of The Lender Before Signing Anything – This is very, very important. All mortgage lenders are not created equal, and before signing anything, be certain to investigate the reputation of the people you are dealing with.
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