Archive for Mortgages

The 28/36 rule

What is a manageable mortgage payment? A rule of thumb among mortgage lenders is the “28/36″ measure of how much of your total pretax income goes to paying back loans: no more than 28 percent for monthly housing expenses( property taxes, homeowners insurance, homeowner’s dues, and mortgage), and no more than 36 percent for all debt ( car, home, student loans, credit cards). This “debt-to-income” guideline means on a 30 year mortgage of $180,000 at 4.5% will be a payment of $912 and you will need a household income of $52,000 to meet the guideline.

Banks also take into account the “loan to value” ratio of how much of your own money you are putting down. This assumption is that people will be more likely to keep up payments on a home that is worth more than the mortgage. The classic 20 percent down payment. Plus , you now have “skin” in the game.

Taking the Hassle Out of Getting a Mortgage by Paul Ferraresi

The time consuming process of getting a home loan is frustrating. Online programs have removed a great deal of the paper work.

One new entry in the online mortgage program is “Stream Loan”. A fantastic article from Barron’s’ February 27, 2017 explains the benefits of using this program.

LINK TO ARTICLE

http://www.barrons.com/articles/streamloan-guides-borrowers-to-mortgages-1488000319?mod=BOL_archive_twm_col&tesla=y

Here’s what you can do to get the best Interest Rate deals

5 Key Websites

Credit.com
Shop for the credit card that’s best for you based on interest rate, rewards or other features. Also try cardratings.com.

Bankrate.com
The site lists the best and latest rates on mortgages, savings accounts, auto loans and other financial products from lenders nationwide.

HSH.com
Find calculators here that can help you determine the size of the mortgage you can afford and the cost of refinancing.

AARP.com
Check out more than a dozen AARP calculators and tools to help you manage your finances. Search for “Money Tools.”

MyFICO.com
The company that produces the widely used FICO credit score offers tips on how to improve your score to qualify for better credit terms.

Mortgage Due At Death

If you have a Will and you die then your estate must pass through probate (the term probate is “To prove valid, authentic”). Now, if you do not have a Will, you actually do have one and it is called the State Statute. Your assets do not go where you think they should. None the less, without a Will your estate still has to go through probate. (Settling a Will is very time consuming and costly. We always recommend that if your asset base is over $100,000 then you should use a Living Trust).

When you die your estate goes through probate. Your estate administrator must inform your mortgage lender of your death. Even if the mortgage is signed by both spouses, the lender has 4 months to decide whether to honor the mortgage or call it in for full payment.

From 1982 to 2012 interest rates dropped and very few loans were called in. With increasing interest rates on the rise, expect more mortgages to be called in by banks. Protect yourself by having adequate life insurance or liquid cash to pay off the loan should it be called. Better still, set up a Living Trust to hold all your assets and the loan call could be averted.

Reverse Mortgages

I am NOT a fan of reverse mortgages. There are far better alternatives that could have been employed earlier in life to enhance one’s wealth.

There are an increasing number of bad results that come about from these reverse mortgage programs.

Example: Under HUD regulations, when a spouse with a reverse mortgage dies, the lender can require the surviving spouse, whose name was NOT on the mortgage, to repay the loan or lose the home through foreclosure. The regulation affects thousands of widows and widowers.

If you have obtained one of these reverse mortgage programs get sound legal advice and protect yourself before a death occurs.