It’s no secret that the U.S. housing marketing is having one of its largest slumps since the early 1980s. Pick up a newspaper or turn on the news and you are inundated with a daily report of more foreclosures, people falling further behind on their payments and a general souring of the entire housing and mortgage market. However, even during this downturn there are those who are continuing to buy the home of their dreams and taking out mortgages to help finance that dream.
How can the savvy consumer make sure that they are not caught up in the mortgage crisis and not become just another statistic? By examining the type of house and mortgage you want to take out, as well as doing a little planning before you make the plunge, can mean all the difference in the world between making it or falling into the ever-widening black hole.
One of the reasons the mortgage industry is being hit so hard right now by defaults is that credit standards were relaxed to the point that many people who in a normal marketplace would not qualify for a mortgage were granted the loan. To their credit, some of these people are maintaining a stellar record and are on their way to owning their own house. Yet for many others they quickly got themselves into a situation where they could not financially afford the mortgage they were in thanks to adjustable interest rates and buying more house than they could afford.
One thing anyone who is looking into buying a house should ask themselves is how much house do they really need? Americans have tended to buy bigger and newer, which raises the cost of a typical house considerably, especially in areas where land prices are high. A mortgage company is not in the business of determining how much house you need – they are only looking at your financial ability to repay the mortgage.
Though you may be able to squeak by and get approved, how much is that larger house pushing you to the edge where one slip and you fall behind because you cannot afford it?
Of course, it goes without saying the better your credit the lower your interest rates. Even in times when lenders tighten their credit criteria for lending new loans you will always benefit by cleaning up your credit before you buy a house. Ever quarter of a point you can lower your interest rate can translate into tens of thousands of dollars of potential interest you do not have to pay.
Speaking of credit, make sure that you are putting down as much as you can possibly afford towards a down payment when you go to purchase a house.
The more you put down the less likely mortgage lenders are going to require that you buy insurance on the loan.
Typically, you should aim for between 10-15% of the home’s value as a down payment. Again, for every dollar you put down towards the down payment on a house now, the less interest you will pay in the future – not to mention unnecessary insurance payments. Mortgage lenders want to see that you are serious about buying and paying for that house before they give you the best deals.
Mortgage industry is playing an important role today to meet the people’s needs. The industry is constantly engaged in making changes and bringing new ways to assist people in some of their most important personal and financial decisions. The industry is involved in making changes to suit people’s requirements keeping in mind their financial conditions. Along with conventional fixed rate products mixtures of typical adjustable rate mortgage products, interest-only and payment option type ARMs, high LTV financing and FHA products have been introduced. This expansion and variety in the products is intended to help larger number of people to qualify for the home ownership. There is a fair competition among the lenders to provide customers with the best rates staying within the boundaries of State law. Customer satisfaction is paid maximum importance today. This trend has helped the borrowers belonging to all levels as the positive affect is now reaching people on a wider range. People have got the opportunity to take advantage of a wide range of products available in the current market. This has raised the buying process with a greater mass being able to participate in the program. But with this positive feature there has been a recent trend of increase in the number of fraud cases in the industry which is a growing problem in the industry today.
According to the National Mortgage Complaint Center, the number of fraud cases in the mortgage has increased over the recent years. Mortgage companies have been using false documents and getting them signed by borrowers. Many of them have even charged high interest rates and borrowers have been making such high interest payments due to lack of awareness on recent market trends.
It is found out that an average homeowner in the United States has to pay $1250 more in sub-prime mortgage industry. Sub-rime mortgage are offered to high risk borrowers who may have been rejected by other lenders. In recent years this industry has seen a considerable growth with a lot of consumers getting qualified for this loan. Consumers who face difficulty with the credit market are generally availing this loan. But, this growth has simultaneously given rise to predatory lending affecting the most vulnerable lenders. This kind of abusive lending is generally directed to the lower income and minority borrowers. Generally the elderly homeowners with reduced incomes become the target of these sub-prime home equity lenders as they often have considerable amount of equity in their homes. The most harmful practice begins with a loan based on the home equity rather than on borrower’s ability to repay. These borrowers often fail to repay and the lenders acquire the borrower’s home equity and ultimately the borrower loses his home through foreclosure or by signing a deed to the lender in lieu of the foreclosure. There are some other kind of abusive practices which are illegal under various federal or state laws.
Considering the growing rate of predatory lending in the mortgage industry, the National Mortgage Complaint Center has decided to have an audit service for protecting homeowners from abusive lending practices. But borrowers should also be aware of such unlawful activities and keep themselves away from such lenders.
Borrowers should consider some preventive measures to protect themselves from predatory lenders. They should not go by the rates that lenders often advertise. These rates are in fact, much lower than the actual fees charged by such lenders. The lenders advertise such low rates just to lure consumers so that they can approach them for loans.
Borrowers should demand a written copy of the fees that they keep paying to the lender on a monthly basis. This is because lenders often provide an estimate of fees at closing and later they charge higher fees pretending that they have forgotten to include these charges. But keeping the proofs of such documents will help borrowers in case of any discrepancies in the mortgage process.
If there is a rise in rate in the market during the time period between the application and closing, the lenders charge higher rate to borrowers. On the other hand if the rate falls downwards, the lenders try to ignore it and the borrowers are deprived of the advantage of the lower rate. So, the borrowers should monitor the market during this period.
The borrowers should try to keep a track of all the documents involved during the process and ask for proper clarifications wherever they have a doubt. Going this way will minimize the problems of being cheated by the mortgage companies to some extent. The borrowers should try to consult an Attorney or a professional known to the borrower and get the documents verified by them.