Articles on Loans | Topics: loans, loan, loaning
by Nerys Decker
6 Steps to Pre-Qualification
People wanting to take a home mortgage loan are mortally afraid of being considered bankrupt barely a day or so after their home loan has been approved. If borrowers have a reputation of bankruptcy or foreclosure, it can mean bad credit loans in the mortgage business. Therefore, a borrower with such a history should not expect to get the same kind of home mortgage loan as a borrower with perfect credit.
Self Pre-Qualification
Credit Score: Before trying to get a home mortgage loan, borrowers should first see realistically just where they stand with their credit rating. Do they belong to the A, B, C or D grades where A stands for perfect credit; B for a bit of tarnished reputation; C fairly bad credit; and D for very bad credit? Scoring models also make a big difference to the borrower: Here, a near perfect score is about 800 with scores getting bad as you reach the 400 mark. Some of these go by names such as FICO, Beacon or Empirica and belong to major credit reporting agencies.
Loan-to-Value Ratio (LTV): Loan eligibility also takes into consideration the ratio between the amount of money borrowed on a home mortgage loan and the real value of the property being placed as collateral. To know the value of new purchases, as a borrower, you would have to consider the lower purchase price of the appraised value. If a home owner has lived on the property for about six months or a year, coupled with refinance, the appraised value can be used in the loan to value calculation. But this distinction can also present problems as when a home is bought a home worth $100,000 at an auction for a mere $60,000.00. Credit needed over the mortgage amount is usually made from a cash down payment. When the loan available due to limited LTV does not meet the requirements of the sale price of the house in question, family support usually helps.
Debt-to-Income Ratio: You can calculate the debt-to-income ratio by adding all the borrower's debt payments, including the home mortgage loan applied for and any other such as car loans, consumer debt, credit cards etc. Now, divide this number by the net cash available each month for the borrower's living expenses and his debt. Lenders would not prefer this figure to exceed 40%.
Affordability: Having all these calculations at your fingertips, you should be able to judge your borrower's affordability and exactly where he falls in the credit rating system for a home mortgage loan.
| Historical Quote |
Neither a borrower nor a lender be,
For loan oft loses both itself and friend,
And borrowing dulls the edge of husbandry.
This above all: to thine own self be true,
And it must follow, as the night the day,
Thou canst not then be false to any man.
| —William Shakespeare (1564–1616) |
|
|
Pointers for home mortgage loan borrowers:
Points for good credit borrowers: If a borrower has a history of bad credit, lenders will charge him more points and higher rates of interest since it is a risk for a lender to deal with such a person. But borrowers on home mortgage loans with a good credit history should not enter into a loan agreement where they are forced to pay points based on a bad credit loan. After all, if a borrower has worked hard to earn good credit, he deserves the benefits.
Pricing for bad credit borrowers:
To have bad credit often means coughing up a higher rate of interest and origination fees on a home mortgage loan. Usually, points can come to the borrower in several avatars - origination fees, discount fees, broker fees or yield spread premium. Points on a loan refer to a fee that is about one percent of the loan amount. So, borrowers with good credit may often pay nothing while those with bad credit will have to pay four or five points. Sometimes, unwary customers have been asked to pay up to 10 points - something highly unwarranted. In fact, should this happen to you or anyone you know, he should consider it a red flag that someone is trying to cheat him. Of course, the mortgage broker will explain this by saying he can provide a loan where no one else will take the risk.
In such cases, finding a lender willing to help out with credit may take a little longer for the borrower but if he is diligent enough about his search, the home mortgage loan will finally materialize the way he wants it.
|
We strive to provide
only high quality articles on our website. If
there is a specific loans-related topic that you would like us to cover, please contact us here.
Please note: All personal opinions expressed in the "Highway robbery How to avoid getting taken advantage of in the loan process" article belong to the contributing author and are not necessarily shared by LoansCreditConsolidation.com. |
Credit Card Cheques and Cash Advances
By Braiden Holmes
Once you've got a credit card, you'll find that you can do more with it than just pay for things with the card. You might be sent a credit card chequebook, for those times when you're paying someone who can't accept your card....
The Payoff of Student Loan Consolidation
By Abraham E. Farrell
Consolidating your student loans is one of the smartest and easiest things you can do to reduce your student debt burden, provided you research your options carefully. Why consolidate your student loans? A student consolidation loan allows you to combine your federal student loans into a single loan with one monthly payment, which is usually lower than the payment required under the standard 10-year repayment option....
Unsecured Personal Loans
By Walburga Hudson
It seems that everyone has to take out a loan for something during the course of their life. It may be for a new car, a home or even to get a college education....
The Pros and Cons of Consolidation
By Zackary Bowers
4 Pros and 4 Cons Debt consolidation is one of the most important financial decisions some people will face in their lives. When debt begins to overwhelm your life, bills seemingly coming at you from all angles, the idea of simplifying your debt into one manageable bundle seems enticing....
|
