Mortgage Pre-Approval

So, you have decided to purchase a home and you are looking to ease the process as much as possible. This is a natural desire as the process of purchasing a home can be quite complicated and time consuming. One of the easiest ways to streamline the process of purchasing a home is to get pre-approved for your mortgage. Ensuring that this element is taken care of can help to decide the home you are able to purchase. The pre-approval lets you know your fiscal limitations before you begin the search process.

Be careful when talking to your financial institution as there are a few different kinds of approvals that banks will do. The first is what is known as a quick assessment. This is simply a general estimate of the amount that you "qualify" for. This is not, however the amount that you will definitely get. The quick assessment considers factors such as your down payment amount and credit history. The second kind of approval is the one that you are looking for, the complete pre-approval. This approval takes a much more focused look at your financial standing. It will define exactly how much money is available to you for a mortgage. As you can imagine this has a huge impact on your shopping process.

It is a truth of the real estate world that a buyer with a pre-approved mortgage will hold consideration over one who does not. This is another excellent reason to have the pre-approval. What if there are competing offers on the home? If you have the pre-approval and the other potential buyer does not, your offer will hold more weight. Sellers are always interested in having their home close quickly and without stress, the pre-approval is your assurance to them that this will indeed happen. With your approval in hand you can shop for a home with confidence and financial security.

M. Shane is a member of the REW Writers Team. A collective publication network facilitated by Real Estate Webmasters. Each article is contributed by a member of our real estate community. This particular article was submitted on behalf of HomesByLender.com, your source for FSBO homes.

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The world of mortgages is a small world after all

The world of mortgages can be intimidating for anyone who doesn't have much experience in the field. For instance, where can you turn to for comprehensive information if you're a first-time buyer? Alternatively, what if you're just browsing for some basic facts? Given the breadth of information available on mortgages, some might think that they'll have to sort through a muddle of facts, figures and "small print" to find exactly what they're looking for. But knowing where to look and taking all the necessary steps ensures a smooth - and simple - experience. For starters, why not turn to the web?

The web is undoubtedly one of the most useful resources when it comes to searching for a mortgage, re-mortgage, or mortgage protection plan. With a few clicks of a button, you can browse through various plans, compare offers, fill out an application and even calculate payments for potential loans. Different packages are thoroughly explained - so even first-time buyers are kept in the loop - and there's always a way to contact an adviser via e-mail or telephone if additional guidance is required.

There are various aspects to consider when searching for a mortgage, many of which will affect your method of search. If you're a first-time buyer, for instance, you may have a lot of questions about the differentiating factors among available mortgage plans. If this is the case, you'll want to start by accessing comprehensive fact sheets on different mortgages, what they offer, and who they suit best - all of which can be done online. Moreover, online search offers guidance through the entire mortgage process, from selecting a suitable mortgage plan to learning about the various repayment methods. You'll even be able to gain easy access to any special offers and incentives which are tailored to the mortgage plan you're after.

However, if you're after a specialised mortgage - such as a capital raising mortgage, a commercial re-mortgage, or even a bad credit remortgage - there's no need to jump between sites. That's because there are plenty of one-stop-shop mortgage websites which cater to every type of customer. Whether you're after a first time buyer mortgage, a buy-to-let mortgage, or a capital-raising re-mortgage, you can still find all the information you need in one, convenient place online - with the reassurance that you can count on additional support from an adviser if needed. Moreover, you'll save valuable time, making the overall process of finding a mortgage worthwhile. So next time you're fretting over diving into the world of mortgages, don’t - simply dive into the web instead.

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2007 increases in house prices will hit first time buyers the hardest

In 2006, the growth of property prices in the UK stripped even the expectations of most property experts. A recent article in the Guardian newspaper, for example, highlighted that while many industry commentators predicted a 2 to 4 per cent rise in house prices in 2006, actual prices of property rose by almost 8 per cent. This year, prices are expected to rise at a slower rate - 3 to 6 per cent; but, as last year's estimations show, a variety of factors could work to thwart this expectation.

Forecasts for the property market in 2007 attribute a variety of factors to its current buoyancy: these include the rise in single households, a deficiency of new housing stock and a rapidly ageing population. These particular issues have led to the current volatility of property prices, and they indicate a pattern that looks unlikely to fade in the next 12 months.

David Miles, chief UK economist at Morgan Stanley, has estimated that over the last ten years, house prices in Britain have risen by 112 per cent; conversely, real disposable income has increased by only 29 per cent. While this rise has been most prominent in the south-east of England, other parts of the UK have also been experiencing rises in property prices: according to Liam Bailey, head of residential research at Knight Frank, Northern Ireland and Scotland will see their house prices grow by 10 per cent and 9 per cent respectively in 2007.

One of the most significant consequences of this dramatic rise in house prices in the last decade is that it has made it much harder for first time buyers to enter the market. In fact, it has been estimated that only 36 per cent of mortgage approvals are currently for first time buyers, as opposed to 58 per cent in the early 1990s.

New research from Halifax suggests that first time buyers were actually paying over £150, 000 for property in 2006, as opposed to just over £137, 000 in 2005 - an 11 per cent increase in just a year. The study also found that in the last five years, house prices for first time buyers has risen by 95 per cent, from around £77, 000 in 2001. Worst affected are people looking to enter the property market in London, with the average first time buyer paying over £250, 000. Lancashire, on the other hand, offers first-time buyers the cheapest property.

As the needs of first-time buyers have become increasingly more important in this particular property climate, many mortgage providers have been offering specialist first-time buyer mortgages in order to allow this important demographic to gain a firm foothold on the property ladder. Indeed, a variety of different mortgage types have emerged, including capital raising mortgages, home-mover mortgages and debt consolidation mortgages, among a variety of others. So property buyers can always rest assured that they'll be able to find appropriate mortgages for their needs, however much property prices may rise in 2007.

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Remain Objective When Viewing Homes for Sale

House hunting can be much like looking at exotic sports cars. Your eyes say yes, but your wallet says no. When hunting for your next home, it is important that you remain objective during the process.

When viewing homes, there are a number of factors you should take into account. The obvious things include subjects such as space, the neighborhood, quality of schools and so on. You can read up on the long list on the web or in just about any real estate book. There is, however, another thing you need to concentrate on that often gets glossed over by guide books and gurus – your peace of mind.

Before you buy a home, you need to consider how you feel about stress and risk. Many people go out and pick a home they can barely afford. Some pick homes they have to pull all kinds of tricks to get financing for. Obviously, such situations are more than a bit risky if the real estate market flattens out or depresses as we currently are seeing. Regardless, some people can handle the risk and others cannot. The question, of course, is what kind of person are you in this regard?

When hunting for a home, your first step should be getting pre-approved by a lender for a mortgage. Taking this step provides you with a clear and concise idea of what you can afford and the payments you are going to have to make. It also lets you determine how comfortable you are about committing to such payments. Lying awake all night worrying about money is a terrible way to live. Getting pre-approved takes the hassle out of the process.

Once you know the pre-approval loan amount, only view homes that are priced within that range. If you are pre-approved for $350,000, looking at $450,000 homes is going to be a waste of your time and futile. Yes, you might find the perfect home and be able to come up with some creative way of financing the purchase. That being said, you are going to be pressing the envelope on your finances. Is it really going to worth staying up all night because you are stressed about making the payments? It may be, but then again it may not.

Raynor James provides information on your options for mortgage loans.

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The Importance of a Down Payment on Your Mortgage

When purchasing a new home, your mortgage options are dependent on a number of factors. Most people understand that the down payment is one of the elements, but not why it is important.

A down payment is simply the amount of money you put towards a purchase independent of financing. For many people, it is the money they have saved up over time. These savings can be from stocks, a savings account and even a loan from their 401(k) retirement plan. Regardless of the source, the amount of the down payment goes a long way towards expanding or contracting your mortgage options.

In the old days, you could expect a lender to require you to pay 10 to 20 percent down before they would finance your purchase. These days, this isn’t really true anymore. From government programs to lenders offering unique financing, you can actually buy by putting next to nothing down. Many people jump on such financing without asking the fundamental question of whether doing so is a good idea.

In a perfect world, you should put down 20 percent or more on a home purchase. Why? Well, there are a couple of reasons. First, lenders will waive any requirement that you have and pay for private mortgage insurance if you put this amount or more down. That can save you a couple hundred bucks a month. Second, the magic twenty percent figure lowers your risk profile to lenders, meaning a lender is going to be willing to overlook credit blemishes and other “problems” you might have. Finally, a twenty percent down payment also creates immediate equity in your home. You can access this equity should a financial situation arise where you need cash.

Obviously, the vast majority of borrowers do not put 20 percent down. It is no secret home prices are high these days. Trying to put 20 percent down on a $400,000 home means you need to come up with $80,000. That is a big chunk of change for many of us, particularly first time buyers. In such a situation, you need to look to other mortgage options. Just understand you are going to pay more in interest rates and points.

Raynor James is with FSBOAmerica.org - get information on mortgage loans.

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When To Make A Minimum Down Payment on Your Mortgage

Understanding the down payment and mortgage relationship is critical if you are getting into homeownership. In some situations, there are times when you want to minimize the down payment.

A down payment is simply your out of pocket cost when buying a home. Typically, the less you put down, the harsher the terms you will have to agree to when it comes to the financing. Lenders like to see borrowers share as much of the risk as possible on a loan. The more you share, the better terms they will give you. The sharing part of the process is the amount of money you put down.

In general, putting as much down as possible is a good idea. If you can put 20 percent or more down, you can avoid paying private mortgage insurance. It will save you a couple hundred bucks a month. You can also immediately create equity in your home, which can be used if you run into financial problems. In many ways, equity is the biggest savings method most people have these days.

Ah, but are there situations where you want to minimize your down payment? Yes, there are a couple of them. Let’s take a look.

Some of the more popular shows on television cover flipping a home. Flipping simply refers to taking a “beater” and fixing it up. Once fixed, you can turn around and sell the home at a profit. In such a situation, you need to minimize your down payment because you will be using your cash for the improvements. Further, you do not really care about the interest rate on the home because your goal is to sell it fairly quickly. In short, there is no advantage to making a big down payment.

Another area where down payment amounts come into play has to do with time. If you are going to be living in an area for a relatively short amount of time, it may make sense to minimize your down payment. People in the military, for instance, often serve 2 or 4 years in a particular location and then are transferred to a new location. Since the move is mandatory, one can’t be sure how long it will take to sell and old home. This means you may want to minimize the cash investment in your old home so you have it on hand to buy a new one.

Obviously, there are other issues where a small down payment makes more sense than a big one. The point of this article is to give some thought to how much you should pay given your particular situation. Don’t just go with the traditional amounts.

Raynor James is with FSBOAmerica.org - get information on mortgage loans.

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Mortgage Rate- Five Hot Tips for Sub Prime Applicants

This news flash just in: NOT EVERYONE HAS A GOOD CREDIT RATING. Fair Isaac and Company otherwise known as FICO puts together a credit rating on just about anyone old enough to spend money. While the exact formula for the rating remains secret, the things you can do to get a home mortgage with a bad FICO score are not secret.

If you are in the sub prime category online lenders can save you a lot of time. Even with the recent "scandal" of sub prime lenders, there will always be a sub prime market. Here are some steps you can take to become a homeowner with bad credit.

• KNOW WHERE YOU STAND It is this simple: the higher your FICO score the better the deals will be. Get a copy of your report, fix any errors and take steps to improve your score. If you are below 500 you are going to have a hard time getting a loan. If you are in the 550-650 range you should be able to get a loan with a down payment. If you are in the 650 range you should be able to get 100% financing. Just bear in mind that things have severely changed in the last 6 months.

• START SHOPPING Online lenders can save you lots of time and frustration. Look for sub prime lenders-lenders that specialize in loans for borrowers with bad credit. Apply with several of them, but thru a service like "Guide to Lenders" that way your credit report will only be pulled once.

• SAVE FOR A DOWN PAYMENT As we have shown if you don't have a great credit rating cash will help you big time. The more your financial commitment to the deal the better your chances of getting favorable rates and terms.

• DON'T GIVE UP Someone out there has a loan with your name on it-you just have to find it. Don't take no for an answer.

• NOTHING LASTS FOREVER If you find a loan with rates and terms not to your liking you may want to take it and refinance in a few years when your score has improved.

Use the experience to grow and improve your score and you will be the winner. A bad credit rating should only slow you down not stop you from getting a mortgage. On line lenders will save you time and frustration and help you achieve your goal of home ownership.

Jack Krohn is a leading free lance writer on Home Equity and Mortgage issues with over 35 articles to his credit. He is also the #1 author of Home Security Articles in the country according to Ezine Articles.

If you are looking for a mortgage, home equity loan, or refinance. GET UP TO 4 FREE MORTGAGE QUOTES and
FREE HOME EQUITY LOAN INFORMATION

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Mortgage loan defaults - Look to the Banks

There is a multitude of lenders in the industry with the only concern being their financial well being

Because of the massive amounts of money to be made, companies have been myopic in their priorities, focusing more on new products to present to the public to bolster their quarterly earnings.

Fast forward today and you have heard or read about prominent lenders filing for bankruptcy protection. One could easily make the mistake of viewing these companies as victims, but if one looks closely, part of the blame falls squarely on the shoulders of the banks themselves.

In many ways the banks are a victim of the very loan programs they themselves created. The rising number of mortgage defaults occurring today are from mortgage loans and programs cooked up in the well appointed boardrooms across the country.

In light of the recent developments that are now causing harm to the companies themselves, a question must be asked: Did the banks consider the possible consequences? If they did not, it points to short sightedness or even incompetence. If they were aware of this and simply wanted to “take the money and run,” it has far more sinister implications.

For the consumer, the danger lies in accepting any loan option the mortgage company presents you. Many loans can contain a shopping list of add-ons If the programs they tout can end up taking them down, It can take you and your home as well.

It’s like the stories one reads about of the hunters in the woods that end up shooting each other.

So concerned with shooting something, the hunter shot the first thing that moved - his partner. The ability to discern was overshadowed by the desire to perform.

The same analogy can be applied to the banks.

Placing an overriding priority on writing as many loans possible to “make the numbers,” some banks lowered the standards on both the programs they offered, and the oversight required. This allowed people to purchase homes whose financial qualifications might be suspect.


Because the mortgage company typically knows far more than the customer, when shopping for a loan, you must know how to protect yourself. It would not be advisable to approach a mortgage loan without a thorough understanding of the loan process.

In light of this, it makes good sense to get expert advice before you apply for your next mortgage loan. Mortgage Secrets Exposed! - Exposing the process of mortgage loan rip-off.

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California Reverse Mortgage

Gov. Arnold Schwarzenegger signed a bill that helps protect seniors from unscrupulous lenders when they enter into reverse mortgages.

"It is our responsibility to help protect those who are most vulnerable in our society," said Gov. Schwarzenegger. "Getting a reverse mortgage can be very helpful, but it is a huge decision. We want to make sure people have all the information they need before making any financial commitment and we want to make sure everyone is getting the right deal, a fair deal and an honest deal."

Specifically, this bill prohibits a reverse mortgage lender from accepting a reverse mortgage application or assessing any fees until the potential borrower has received independent counseling regarding the loan. In addition, it prohibits a lender from requiring a borrower to purchase an annuity as a part of the reverse mortgage transaction and requires a reverse mortgage contract to be translated into Spanish, Chinese, Tagalog, Vietnamese or Korean if the contract was primarily negotiated in one of those languages.

A Reverse Mortgage applicant is already required to go through counseling through a HUD sponsored counselor. This has been a requirement since the government took over the program almost 15 years ago. But has time has gone on, safety measures must evolve and be update and it is good to see that Gov. Schwarzenegger see this and is acting accordingly.

A reverse mortgage generally allows homeowners 62 and above to receive either monthly payments or one lump sum from the property’s equity without having to sell the property or make monthly repayments. Reverse mortgage loans typically require no repayment for as long as residents do not move, but they must be repaid in full, including all interest and other charges, when the last living borrower dies, sells the home or permanently moves away. Reverse mortgage borrowers continue to own their homes. They remain responsible for property taxes, insurance, and repairs.

Troy Shellhammer is associated with a nationwide Reverse Mortgage Lender. Reverse Mortgage Nation will provide you access to education material, loan officers nationwide, reverse mortgage information, online calculator, and other consumer benefits.

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Mortgage Calculators Easy As 1,2,3

First Mortgage Trust have developed a number of diverse calculators over the years not only to improve the quality of their clients online experience but also in response to client, consumer and third party requests. Among the calculators are Mortgage Payment Protection, Bridging Loans, Secured Loans, Buy To Let Rental and Mortgage Calculator, Affordability and budget, How much can I borrow, monthly mortgage payments for both interest only and repayment, flexible mortgage calculator and three conveyancing calculators for purchase, sale and purchase and remortgage.

The benefit of online mortgage related calculators are many and varied. First Mortgage Trust's extensive collection of online calculators allow client retention and leaves them in complete control. not only to compare current outgoings but also for anticipated costs and savings. Every cost associated with selling, purchasing and remortgaging is available and for the client to interact with. Mortgage calculators help to create a sticky website.

Calculators are of benefit to solicitors, Independent Financial Advisers, mortgage brokers and those involved in residential and commercial real Estate. The calculators can be used both online and offline for ease of reference to professionals. Other benefits are client and consumer retention as website visitors no longer have to leave a professionals site to confirm or check figures.

For Financial services web designers, webmasters and search engine optimization this becomes invaluable keyword rich content and is an essential must have for any associated site. With around 500,000 searches every month in the US & UK for 'mortgage calculator' this confirms the demand for information required by online clients.

First Mortgage Trust's conveyancing purchase and sale & purchase calculators include a database of approximately three hundred and seventy local authority search fees. First Mortgage Trust update this database annually. Although local search indemnity insurance is now popular amongst conveyancing solicitors it must be remembered that not all lenders will allow this and may well insist on a local authority search. Clients can also work out stamp duty, another substantial cost in the home buying process along with many other functions.

With the ever changing landscape of lending and underwriting criteria it is important that the consumer have calculators available to them. Many lenders have now increased income multiples to as much as 5.6 joint for high credit score, high earners. Before a client proceeds with a mortgage it is important that they have an idea of borrowing capacity, after establishing borrowing capacity they can further confirm monthly figures to confirm affordability.

It is also important that any calculator placed on a financial services website not only carries disclaimers but also keeps pace and reflects changes with legislation from a regulatory perspective. The Financial Services Authority have expressed some concern over the self certification mortgage. A non status mortgage whereby income is not verified by the lender. Therefore a mortgage budget and affordability calculator is essential along with hints as to why the consumer is self certifying their income, this is in accordance with responsible lending practices.

With rising property prices diminishing rental yields a buy to let mortgage and rental calculator also proves exceptionally popular. Where the amount of mortgage available can be reduced substantially by a valuers comments or rental assessment it is important that the client is forearmed.

Mortgage-Loan-UK is a premier resource for personal finance information along with an extensive collection of mortgage related calculators. For more information visit the mortgage calculator page. First Mortgage Trust are also commercial bridging loan specialists.

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Mortgage loan rip-off- Facts to know

The Facts Surrounding Mortgage Fraud and Predatory Lending


Predatory lending occurs chiefly in the sub prime mortgage market, where most borrowers are loosely qualified by the equity in their homes for debt consolidation or loan purposes. In addition, these customers can sometimes be manipulated into bad loans because they want to solve a financial issue. Because of this, mortgage companies and brokers frequently mark up mortgage interest rates to boost their profit margins.

The amount of profit that can be generated provides a luring temptation to break the rules. If you do not protect yourself from the possibility of mortgage loan rip-off, your chances of receiving a excessive priced loan with high points and fess is extremely high.

Current mortgage structure promotes fraud

The difficulty in getting a fair mortgage loan is partly due to the overall structure of the mortgage industry. Under the current structure, a mortgage company is rewarded – through a commission received from the bank, by charging you a higher rate than you qualify for. This is common knowledge, and indeed readily accepting throughout the industry. Isn’t that just lovely?

Now, in some cases it can be a fair exchange, provided the customer is made aware of the scenario and, for example, does not want to pay any up front coats. This is usually negotiated up front.

Unfortunately, current trends show that this area has been greatly abused. Dishonest mortgage companies jack up mortgage rates to whatever level the customer can bear, all the while telling the customer what a “great deal” it is or how much the customer is saving. As one broker put it: ”I tell them what do they care what the rate is, as long as you’re saving money.”

That sounds great, but if you qualify for a rate of 6.5% with no hassles, and you sign up for a loan at 6.99% for thirty years, well you do the math – it adds up. Understand?

In addition, dishonest mortgage companies have a shopping list of add-ons that can put more money in their pocket.

The important thing to know is mortgage rip-off is as much a process as it is a result. It is a process because it can start from the moment you say hello. The companies that engage in this activity are probing the customer to find their weaknesses to exploit – all with a smile. They probe the customer to find out what is important and what is not.

Bearing the above facts in mind, don’t make a move until you receive the best advice for your mortgage needs. Your proper selection of a mortgage loan need not be an expensive hit-and-miss proposition.

Mortgage Secrets Exposed! - Explaining the Process of Mortgage Loan Rip-off

Eleazar Heracleopolis, http://www.accumortgagesecrets.com is the author of "Mortgage Secrets Exposed," the top rated mortgage resource helping consumers prevent mortgage loan rip-off - one loan at a time.

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Mortgage Accelerators (Fact or Fiction)

Mortgage Accelators have been around for years, and most people have heard of them in one form or another. Years ago, the most people's idea of a mortgage accelerator was simply the idea of making an extra payment on your mortgage or adding extra money every month to pay down the principal. Those simple ideas have turned into many different techniques used to payoff mortgages faster.

Extra Payments - This is the easiest type of mortgage acceleration to implement, because it basically involves either making an extra payment whenever you can (using that Annual Bonus for example) or sending in an extra amount with your monthly payment that goes directly towards principal.

There are also many Advanced Techniques that involve using more complicated plans to payoff your mortgage faster. Although these techniques are more complicated, and usually require an investment into the program, they are also much better vehicles for paying off your mortgage quickly and saving tens of thousands of even hundreds of thousands of dollars in mortgage interest.

Although these types of plans are new to the United States, they have been used overseas for years and by a lot of people. In Australia for example, over 30% of people use a mortgage accelerator, and in the UK almost 25% use them.

The basic idea of these advanced products are to pay a big portion of money towards your mortgage using either money you currently have elsewhere, or using a line of credit, such as a home equity line of credit or HELOC. Some of these include Mortgage Accelerator Plus, CMG Financial, and United First Financial.

Mortgage Accelerator PLUS is a money management STRATEGY that teaches smart and efficient money management, with the goal of eliminating all debts, especially mortgage debt, in 1/3 the time. It is a “turn key package” that includes a workbook, instructions, and software that teaches ALL the particulars of using the program, HOW it works and WHY it works.

MAP is based on mathematics and allows you to manage your money to minimize interest. You will be using the same techniques that banks have been using to keep more of your money! MAP also teaches you about Real Estate, Mortgages, Investments, Budgeting, and much more.

Learn more at http://www.mapsavings.com/

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Default Risks For HLTV Ohio Mortgages

In general, nonconforming Ohio home loans are much younger than conforming loans. Wahl and Focardi (1997, 31) report that as of May 1997 ‘’60 percent of first-lien [nonconforming] loans outstanding were made in 1996 or the early part of 1997, compared
with only a 17 percent share of [conforming] loans.’’

Although the nonconforming Ohio mortgage industry is relatively young, the HLTV sector has its origins in Title I lending. Some of the first HLTV securitizations were constructed with assumptions based almost entirely on Title I loan performance. To demonstrate expected performance for its first securitizations—which were also the first HLTV loans ever securitized—FirstPlus relied extensively on Title I performance data. According to Dan Phillips, chief executive officer of FirstPlus, ‘‘that’s how we got the rating agencies to rate the loans, and the insurers to insure them’’ (Timmons 1996). Investors and underwriters have far more performance data with HLTVs now than in late 1994, when Phillips’s first securitization went to market, but performance expectations are still treated gingerly by rating agencies since longterm behavior is relatively unknown (Fitch IBCA 1998b, 6).

Default risk is central to pricing asset-backed securities. Securitizations are structured in such a way that the returns to investors are expected to be reasonable as long as the pool of loans behaves in the manner predicted by the underwriters’ economic models; that is, as long as defaults and prepayments remain within certain bounds. If defaults or prepayments rise above certain limits (which vary with each individual contract), principal or interest payments may not be sufficient to meet the obligations of the issuer. If that happens, the pool will be liquidated prior to its stated maturity in an early amortization. Therefore, the viability of any particular
offer relies critically on the bounds set for defaults and prepayments and their balance against investor yield.

But the unexpected level of defaults or prepayments, rather than their absolute level, can undermine the success of the asset-backed security offering. Prepayment risk is another factor affecting the returns to asset-backed securities. Although HLTV pools have performed above the default expectations for most models, there is substantial concern and debate about prepayment rates. Investor concern arises because prepayment and a resulting early amortization are more likely in a low–interest rate environment (because low interest rates make refinancing attractive to the borrower).

Suppose that the investor holds securities paying a coupon rate of 10 percent. If interest rates drop to 8 percent and borrowers refinance, early Ohio amortization will mean that the investor’s return will fall to 8 percent.

With residential Ohio mortgages, the propensity to prepay is much higher when interest rates fall; this situation can present substantial risk to investors. The extremely low–interest rate environment of 1997, for example, is generally expected to continue throughout 1998 and lead to further refinancing activity (Kochen 1996, 112–13).

Prepayment risk tends to be lower for HLTV Ohio mortgage loans than for conforming A credits. Jeff Moore, president, Mego Mortgage (Atlanta), maintains that ‘‘because the borrower ends up with a loan-to-value on the property in excess of 100 percent, they usually stay in the loan for some time because they can’t quickly refinance out and they still have relatively high debt ratios’’
(Hewitt 1997, 177).

Investors have been satisfied with the general performance of HLTV loan securitizations largely because the model risk has been treated rather conservatively and credit enhancements protecting asset-backed securities holders have consequently been more than adequate. Fitch IBCA (1998b, 6) reports that ‘‘typical [HLTV] credit enhancement levels indicate that the ‘AAA’ tranche could withstand gross losses of 30 percent 40 percent of the pool. This is approximately three
to four times greater than the losses implied by ‘AAA’ credit enhancement levels for a typical subprime pool.’’ (See also ‘‘PaineWebber Senior Vice President Profiles the 125 Percent LTV Sector,’’ National Mortgage News, March 23, 1998.)

HLTV securitizations ‘‘have self-regulated credit support,’’ according to Peter Rubenstein, PaineWebber senior vice president. ‘‘The securitized pools of [HLTV] loans peddled on Wall Street contain a sizable amount of excess spread and overcollateralization, which act as a cushion if the loans do not perform as expected’’ (Timmons 1998d). While such support seems high for a mortgage securitization, in fact the terms of these securitizations are much like those of credit cards (Fitch IBCA 1998b; Fitch Investors Service 1996a).

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For more information about Ohio home mortgages or to refinance your home contact Will by visting www.localmortgagecompanyohio.com

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Closing Costs With Your Mortgage

When applying for a mortgage, it is important to understand that you are going to be responsible for paying costs associated with it. The fees are known as closing costs and can add up quickly.

If you have never applied for a mortgage before, you may be under the impression that it is a simple scenario where a lender gives you a big chunk of change and then expects a monthly payment for the rest of your life. In fact, the lender is going to want some money paid up front. This money comes in the form of closing costs and they can accumulate pretty quickly. While closing costs vary from real estate deal to deal, here are the ones you can expect to run into.

Lender’s Fees can be a harsh wake up call when it comes to closing cost. A lender is going to charge you fees for the origination of your loan and they can be very high. The fees can be attributed to process, underwriting, credit checks and a host of odd little tasks. They can add up quickly to thousands of dollars, so make sure you get a written quote from the lender before applying.

Appraisal Fees are a near constant when it comes to closing costs. As the name suggests, these fees are paid to an appraiser who values the home you are going to purchase. Technically, the fees are not really closing costs because they are paid at the time of the inspection, but they are generally grouped as such when closing costs are discussed. The amount of the fee depends on the property and part of the country you are in. Fees of $300 to $600 are pretty typical.

Title and Escrow – These two fees are nearly always present in any real estate deal. Title refers to the title insurance a lender will require you to obtain. Escrow refers to an independent third party that will act as an agent to hold document and money and issue them as well per the escrow instructions agreed upon by the parties. The fees for title insurance depend on the property while escrow fees vary from area to area.

Impound Accounts are not per se a closing cost, but they are something you should be aware of. The exact nature of an impound account depends on the lender’s requirements. In loaning you money, a lender may require you to pay PMI, homeowner insurance premiums and property taxes in to an impound account. Obviously, these numbers can grow pretty large, particularly with property taxes. It is important that you gain a full understanding of what will be required of you in this regard as buyers can be cash poor after escrow and run into trouble trying to meet the impound obligations.

If it is your first time applying for a mortgage, don’t be startled by all of the fees mentioned above. The key is to educate yourself on what is required for your specific situation and then go into the deal with your eyes open.

Raynor James is with FSBOAmerica - free information on mortgage loans.

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