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You’ve probably have heard of home equity conversion mortgage or HECM. This was introduced by the government through the Federal Housing Administration as a way to assist senior citizens to secure loans. This is a federally insured government program which makes it easier for senior citizens to use their home equity value in order to take out a loan.

What are the Benefits of a Home Equity Conversion Mortgage?

This federal program is distinct in so many ways. First off, the borrower is not required to pay off the loan on the condition that the home he place as collateral is his primary residence. This is entirely different from a traditional loan where you would be required to give monthly payments. You also place your house at risk because the lender would place a lien over your property.

HECM is completely different. As you withdraw your money from the loan, the amount of your home equity proportionally decreases. What happens if you have completely used up your entire home’s equity? The government’s insurance would sustain your loan so you would still be able to withdraw money from your loan. In fact, you would still be able to receive payment even if your lender goes bankrupt or goes out of business. You don’t actually place your house at risk with HECM. Your real estate title stays with you.

The second unique feature of HECM is the term of its repayment. The terms and conditions of an HECM are pretty convenient and reasonable. The borrower has various terms of payment to choose from which includes opting for equal monthly payments or a line of credit type of payment.

The amount of the loan that a borrower can apply for varies depending on several factors which include:

a. The applicant’s age at the time of the loan application

b. The amount of house equity

c. The limit of FHA HECEM loan in the region

d. Current market interest rates

The drawback, however, to this type of loan is that you may completely diminish your home’s equity that there’d be nothing left for your children. Fluctuating and harsh interest rates may also affect the amount of your loan to the extent that the interest alone could largely decrease your house equity.

Understanding the Requisites of HECM

You actually continue to receive loan payments as long as you comply with the requisites of HECM. In fact, you could continue to receive HECM payments for the rest of your life upon the condition that you continuously comply with the requirements for HECM payment. In order to avail of HECM, however, you should be able to comply with the following prerequisites of home equity conversion mortgage include:

a. The applicant is 62 years old or older

b. He should be the owner of the house

c. He should be actually residing in the house

d. He must have a small mortgage balance

e. He must attend counseling sessions about HECM before he actually applies for a loan

Home Equity Conversion Mortgage continues to gain popularity. Many senior citizens resort to applying for home equity loan as an additional source of retirement fund. It is believe that HECM would soon play a significant role in the lending industry.

You can refinance home mortgage loans even with bad credit, when you are consolidating mortgage loans, during the economic downturn to get lower rates or because the lenders have special offers. However, the target is that the process fits to your personal financial plans.

1. The Lower Interest Rates Must Bring Real Benefits.

Before you start to refinance home mortgage loans it is necessary to check your current agreement terms whether there is any penalties because an earlier payment or other fees, when you pay away the plan.

The target is that the future benefits are bigger, than the extra costs. The experts say, that the new interest rate should be at least 2 % lower than the current one. But if your current rate is variable one with the present low rates, you should maybe require even bigger difference. But if you can negotiate a fixed rate with the present rates, that would most probably be a good deal.

2. Refinance Home Mortgage Loans Only Once.

Jumping from one deal to another may feel clever, but it hardly is that. The closing costs plus other potential costs can eat the benefits and if the running time is short, the situation gets even worse. The mortgage business is a longterm business, so avoid sudden moves even if they feel good, because during the longterm the curves move more quietly.

3. The Smaller Monthly Payments.

If this is your target, then the lower interest rate plus the longer payment time brings the results. However, the longer payment time you get, the more you will pay interests. And the more riskier the deal becomes, if you have a variable rate, because you do not know the interest in the future.

4. What About Paying Quicker?

If your financial situation has improved and you have a chance to pay more, then you can refinance home mortgage loans by paying them away quicker, than what the original plan suggests. Now again, check the current terms, whether there is a penalty about earlier payments.

5. Refinance Together With The Mortgage Loans Consolidation.

Many borrowers have taken mortgages many times with the different terms and maybe from the different lenders and the terms can force them to overpay. This makes the management difficult. Now they can both consolidate and refinance home mortgages. If you manage to get lower rates and longer payment time, your monthly bill will decrease dramatically.

As you see the idea to refinance mortgage is not simple, but needs thinking. One important thing is to shop quotes from several mortgage lenders to get the deal, which fits to your plans. The Internet comparison sites offer great help, because you can get quotes quickly, if you have your background information ready and updated in your PC.

Mortgage loan modification and refinancing used to be as eventful as changing one’s shirt on a hot day. Nothing difficult, sexy, or exciting. With home prices plummeting, you may need professional or government help to pull it off.

President Obama’s aggressive rescue plan calls for:

* restructuring distressed mortgages
* keeping struggling borrowers in their homes
* reworking troubled loans
* installing a floor beneath falling property values
* helping up to 4 million homeowners

The Obama administration has set aside $75 billion to prevent defaults and foreclosures even though 52% of loans modified in early 2008 went bad again within 6 months.

Mechanics of the loan modification plan:

* the loan servicing company reduces monthly mortgage payments to no more than 38% of the borrower’s gross monthly income

* government acts to reduce these payments down to 31%

* to get to 31%, the loan servicer will first reduce the interest rate to as low as 2%

* if not enough to reach the 31% threshold, the loan terms are extended up to 40 years

* if still not enough, the servicer will forebear (not reduce) loan principal at no interest

Writing down the principal to make the mortgage loan balance less than the home’s value is critical. Anyone left “underwater” – mortgage greater than home value – would have an incentive to default.

You would think the banks would have every reason to embrace the Obama plan, given the REOs already on the books. I guess their lobbyists in Washington wanted an even sweeter deal – at taxpayer expense.

Incentives:

* loan servicers will receive $1,000 (your tax dollars) for each mortgage loan modification completed

* servicers will receive an additional $1,000 per year for up to 3 years if the borrower is making payments on time

* borrowers will receive $1,000 knocked off the principal each year for 5 years if they make payments on time

No cash incentives are awarded until modified loan payments have been made for at least 3 months.

As with all government programs, strings are attached. The government states that it is out to assist responsible homeowners who were caught up in a historic housing slump.

Caveats:

* house must be owner occupied

* owner occupancy will be verified through credit reports

* the mortgage must have been written before January 1, 2009

* the outstanding principal balance must be $729,750 or less (don’t know how they came up with this figure)

* borrower is required to sign an affidavit of financial hardship and to verify income

* modified loan payments will remain in place for 5 years

Verification is likely to be more stringent than for the original mortgage loan. No more “wink and a nod” loans through shady mortgage brokers.

Loan servicing companies will determine whether or not to modify a loan by using a “net present value” test. The test compares expected cash flow if the loan is modified against performance projections if it is not.

The test is a clever way to placate bankers and investors. When the federal subsidies are included in the formula, modified loans are a better risk for investors.

What remains unclear under the plan is how to deal with second mortgages and equity lines of credit.

Will it work? I’m not sure, but I do believe it’s a lot like chicken soup for the homeowner – it can’t hurt.

If you are a homeowner on the ropes, I would not attempt this on my own. The paperwork alone should be staggering. Work with professionals who know the system and any alternatives available to you.

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Have you been told one or more of the following: Not Qualified, Can’t Refinance, Mortgage Upside Down, Short Sell or Foreclose? Not options if you want your home or made payments on time to protect your credit.

Home Mortgage Upside Down? Modify Loan Into Lower Mortgage Payment Without Refinancing.

Long sought after as the American dream, home ownership and getting your first mortgage is a hallmark of independence and financial fidelity. However, there are several steps and considerations that must be observed in order to get a good deal.

A basic principle of all loans is the down payment. With mortgages, this could not be more important as the amount of debt in question is significantly higher than other loans. By increasing the size of the down payment, not only will the monthly payment be reduced, but the overall interest paid over the life of the loan will be smaller. At the same time, by making a small down payment (less than 20%), then private mortgage insurance (PMI) will be applied due the higher risk associated with the loan.

Secondly, be aware of the rates and types of loans when getting your first mortgage. The three main types of mortgages are the fixed rate, adjustable rate mortgage (ARM), and interest only. A fixed rate is just that, the interest rate will be fixed at the time of the financing. For example, in Denver, CO a 30 year fixed rate mortgage can run anywhere from 6.375% to 5.750% depending on the lender. An adjustable rate mortgage (ARM) has a rate that fluctuates with the market. These mortgages are riskier, but at the same time have lower initial payments. Later on in the life of the loan, the payments typically rise above that of a comparable fixed rate mortgage. Lastly, an interest-only mortgage is one where the buyer pays off the interest in monthly payments, then pays off the principal or refinances.

When applying for a mortgage, the first step is to get pre-approved. Getting pre-approved will allow the lender to get a better picture of the amount of debt that you will be able to accrue safely. During the pre-approval, the lender will inquire about income and expenses; a healthy credit score can help as well. The second benefit to a pre-approval is that it provides you with a better picture of the home you can afford, thus aiding in the home search.

The final step to factor in when getting your first mortgage is the impact on monthly expenses. When considering the home you want versus what you can afford, the advice can vary. The traditional down payment percentage is 20%, but some recommend for a higher amount such as 33%. As for the total cost of the home, some recommend that the price should not exceed 2.5x your salary. A third key piece of advice to consider is the total amount of income devoted towards living expenses, which in most cases should not exceed one-third of your monthly earnings.

A large number of prospective homeowners are interested in acquiring mobile or manufactured homes. Should these homeowners require financial assistance, they will need to take the assistance of approved lenders who make the money available from their own resources as FHA does not lend money for this purpose.

Since these loans are not government funded, they are not low interest loans. The interest rate is fixed based on prevailing market rates. However, since the loan is privately funded, you can take this to mean that mobile home loans are also available to persons with poor credit, albeit at a higher interest rate to compensate for the greater risk involved.

Regardless of the source of funding, lending institutions place certain conditions on the loan advanced for mobile homes. The home being financed has to be used as the principal residence by the person taking the loan. The maximum loan amount and tenure depend on the location and can vary with in designated high cost areas. Tenures vary between 15 to 25 years.

Manufactured or mobile homes are usually sold through dealers or retailers. These dealers themselves can give you names of lenders who specialize in financing these types of homes. They will have the necessary certification to prove that the home in question complies with the construction and safety standards. They will also help you to complete the documentation required to complete your loan application.

Essentially, the prospective homeowner needs to demonstrate that he has the financial stability to service the loan, he should be able to pay 5% down payment at the very least and have a suitable site – leased or owned where the home can be placed. The home itself must meet the required safety criteria and standards and carry a one year warranty. It must be erected on a site that meets the standards for sewage disposal and supply of water, electricity etc.

The law also prohibits the use of the loan to purchase furniture etc. However, it can be used to finance anything that is built in to the house. This could include various appliances such as air conditioners and wall to wall carpeting.
It is amply evident therefore that the mere fact that you have chosen a mobile home or a manufactured home is no excuse for a lender not to lend you money- so far as the home meets the required criteria in terms of site, manufacturing standards and owners contribution. In fact, the ‘Fair Housing Act’ gives you specific protection to ensure that you are not forced to accept higher interest rates etc simply because you are from a minority community etc.
There just doesn’t seem to be any reason to put off that home now!