Car dealers reeling from virus urge banks to loosen auto loan requirements

MANILA - An auto dealers' group said Monday that strict bank requirements for auto loans are hurting their business as they try to recover from almost 3 months of lockdown. 

The Philippine Automotive Dealers Association (PADA) said its members had no revenue during the enhanced community quarantine that shut showrooms. 

Auto dealers that reopened are finding it more difficult to sell cars as banks have become stricter in assessing and approving auto loans, said PADA president Willy Tee Ten. 

“We’d like to request sana that banks become more lenient when it comes to allowing buyers to loan from the banks,” Ten said in an interview with Teleradyo. 

“Kung di nila pautangin yung buyer wala rin kaming benta,” he said. 

(If they won’t give loans to buyers, we won’t be able to sell anything.)

Despite getting no revenue during the lockdown, auto dealers still needed to pay their rent, including accumulated interest on their dues, as well as the salaries of their employees. Ten said auto dealers also needed to pay banks for loans made to acquire their inventory, which they are now struggling to sell. 

Ten estimated that the auto dealership industry directly employs around 35,000 workers. 

In an interview last month, Ten said that his firm, Autohub Group of Companies, which sells brands such as Mini, Rolls Royce, Lotus, and Piaggio, had to lay off some workers because of the impact of the lockdown on the business. 


BANGKO SENTRAL: NOT OUR CALL

Bangko Sentral ng Pilipinas Governor Benjamin Diokno said that it couldn't force banks to loosen their requirements for loan approval. 

Diokno said that while he understands the concerns of auto dealers, banks also need to make sure that their loans will get repaid by carefully screening applicants. 

“Hindi namin pwedeng i-pwersa yung bangko, diskarte ng bangko yan,” Diokno said in another interview on Teleradyo. 

(We can’t force banks, it’s their call.)

Diokno said the central bank implemented several measures to encourage banks to increase lending. He pointed to the 125 basis-point cut in the BSP’s key rate, as well as the 200 basis-point cut in banks’ reserve requirement. 

Philippine banks have ample capital and are well-positioned to withstand possible shocks from the pandemic because of low bad loan ratios, he said.

news.abs-cbn.com

Tesla secures $1.29-B loan from Chinese banks for Shanghai factory

Tesla Inc entered into agreements with lenders in China for a secured term loan facility of up to 9 billion yuan ($1.29 billion), according to a regulatory filing on Thursday.

The electric car maker said it has also signed agreements for an unsecured revolving loan facility of up to 2.25 billion yuan, adding that both the loans will be used for its Shanghai car plant.

China Construction Bank Corp, Agricultural Bank of China, Shanghai Pudong Development Bank and Industrial and Commercial Bank of China are the lenders, according to the filing.

Besides construction and production at the Shanghai factory, the loan may also be used to repay the 3.5 billion yuan debt due to be repaid on March 4 next year.

The factory, which is Tesla's first car manufacturing site outside the United States, is the centerpiece of its ambitions to boost sales in the world's biggest auto market and avoid higher import tariffs imposed on US-made cars.

Reuters reported earlier this week that Tesla and a group of China banks had agreed to a new 10 billion yuan, 5-year loan facility for the automaker's Shanghai car plant, citing sources familiar with the matter.

source: news.abs-cbn.com

Yay or nay: 'Payday' loans for financial emergencies

MANILA - Availing a payday loan for financial emergencies may be convenient, but is it a wise move?

A payday loan is an amount of money lent at a high interest rate, on the agreement that it will be repaid when the borrower receives the next paycheck.

To pay for the loan, a borrower has to issue a post-dated check in the amount that he and lender has agreed upon. The lender then holds on to the check and cashes it on the agreed date, which is usually the borrower's next pay day.

Despite its convenience, Fitz Villafuerte, a registered financial planner, warned that payday loans can lead to more problems.

Whereas personal loans happen through credible, regulated financial institutions that are part of the system, getting a payday loan from people you don't know is an unpredictable practice that may leave you in a bad place.

Some lenders also require borrowers to surrender their ATMs, which can lead to problems, like lenders taking more money than what is borrowed from them.

For Villafuerte, if taking out a loan is unavoidable, then it is better to get one from your company or a bank.

"If there's a payday loan offered by the company, I would say that's the better option because at least, automatic deduction na siya sa salary mo. However, if your company does not offer that, then availing of one sa bank is also okay. However, make sure that the reason you're buying money is an emergency," he said.

He also said that building an emergency fund can help save one from living from paycheck to paycheck.

"The best way to really avoid getting a payday loan is to have money saved in the bank specifically for emergencies. It's good that payday loans are available, but make it as the last resort to get money if there is a financial emergency," Villafuerte said.

source: www.abs-cbnnews.com

Should You Use a Loan to Settle Bills After Christmas?

While there is much to be admired about the UK’s recent economic growth, some experts believe that it is far too reliant on debt-fuelled consumer spending. This has led a leading business group to downgrade growth forecasts for the next three years, lowering estimated GDP expansion from 2.6% to 2.4%. While this should not detract completely from economic growth in the UK, it does serve as a warning for businesses to measure their spending. It should also encourage customers to become more responsible borrowers, as they carefully appraise their financial circumstances prior to making a commitment.

Should you take out a personal loan to pay Bills after Christmas?

This is a pressing and topical issue at this time of year, especially as the fiscal demands of Christmas take their toll on households throughout the UK. As a result of this, many may well be considering taking out a personal, short-term loan immediately after the Christmas period has ended, in a bid to cover recurring bills such as utilities, food and beverages.

With this in mind, here are the key considerations before making an informed decision: – 

The Nature of unsecured Lending

Before you make any decision, it is crucial that you consider the unsecured nature of lending. This is arguably the most important thought process, as unsecured lending does not require the borrower to submit any of their existing assets as collateral. To compensate for this, however, many unsecured lenders apply higher rates of interest to their finance, which ultimately means that you will pay far more over the course of the agreement. You must be prepared to repay more than you borrow, while interest rates will also rise as agreements shorten.

Can you quickly repay a short-term loan?

Once you are comfortable with the generic demands of short-term lending, the next step is to consider individual loan offers and determine whether or not they are suitable. More specifically, there is a need to identify the specific interest rate and length applied to each potential agreement, as this enables you to drill down into the detail of your loan and create a payment plan. You can start by identifying market leading service providers such as www.smart-pig.com, as firms of this type offer the most competitive rates and transparent rules regarding repayment.

Is there a viable Alternative to Lending?

It is important to be proactive when considering spending and borrowing, so any period of financial planning should be undertaken well in advance of making an application. This will help you to identify a potential alternative, as it may be possible to reduce spending over Christmas without impacting on the overall experience or forcing you to borrow in January. This will require a detailed and carefully designed budget, and one that can help you to optimise your finances.

source: 20smoney.com

The Fastest Forms of Loans

Loans aren’t always easy to find. If you need the money quickly, you can’t go to a bank because the application process could take weeks. You can’t go to a building society for the same reason. There are alternatives, though.

Let’s discuss some of the fastest forms of loan.

Payday Loans


Payday loans are always going to be the quickest loans because there are no credit checks involved. All you have to do is tell them how much you need and how long you want to borrow the money for.

The interest rates are high, which is the big downside, but if you need the money within a few hours there’s no faster way to get that money.

There are plenty of payday loans companies around, so do your research and see which one offers you the best deal.

Credit Cards


Credit cards are another easy way to get money fast. If you have a good credit score and own one of the top cards, you can benefit from the ability to borrow a couple thousand dollars with no questions asked. The terms of repayment are generally fairer than payday loans, but your credit score does come into it.

What if you don’t have the score to get one of the better credit cards, though?

There are still options available to you. One option is to take out a credit card for those who have bad credit. You can borrow small amounts of money with no questions asked, which is still a superior option to going to a bank.

Person-to-Person Lending

The final option that would fall under the definition of ‘quick’ is to lend from someone you already know, such as a family member or a friend. The chances are you won’t be able to borrow as much money, and you will have to make a conscious effort to repay on-time, but it’s often the case where you can get money without any interest attached.

Another variation of this is crowdfunding. We wouldn’t recommend this because it does take much longer to get funded, and there are no guarantees you’ll actually get the money, but on the other hand you don’t have to pay the money back.

Conclusion

The best ways to get money fast is to either use your credit card or to take out a loan with a payday loan company. Just make sure you always consider the financial implications of taking out a loan. Ensure you have the means to pay back the money on-time.

source: christianfinanceblog.com

Understanding Settlement Statements: How to Decipher Yours Before Closing on Your Home

One of the most important documents you’ll receive as you draw closer to closing on your new home is called Good Faith Estimate, which is a precursor to the settlement statement that defines the financing of your home closing. This detailed piece of paperwork may seem like it needs its own decoder ring to understand, but you can use this simple guide to understand your Good Faith Estimate.

 Property Information

When you receive your Good Faith Estimate, double-check that the information about your new home is accurate, including the address, purchaser name and date. The date is especially important because estimates of the closing costs like interest and taxes can vary based on this date.

The other important date to review is the deadline to lock in the offered interest rate. Your lender may require you to pay a fee to lock in that interest rate and may also requires you to close the loan by another deadline to guarantee that rate.

Costs and More Costs

While applying for your mortgage, you probably discussed potential monthly costs with your broker. Under the “Summary of Your Loan” area, actual interest and recurring costs are further defined. Verify whether your interest rate can change over time or if you will face any penalty for making early payments. In this area, you’ll also learn if your mortgage lender will require you to pay a portion of your homeowners insurance and property tax every month with your housing payment — called escrow charges — or if you can independently pay these charges.

Origination Charges

Your mortgage company may charge you fees for originating a loan on your behalf, including fees to lock in rates or process your paperwork. Some of those fees may be collected up front, while others are included in your closing costs. You may also agree to pay additional charges called “points” to lower your interest rate. Your mortgage company may provide several rates: in general, lower rates cost more to lock in at closing, while higher rates reduce your closing costs.

Settlement Charges

Settlement charges often include

    Surveyor fees
    Legal recording fees
    Title fees
    Prepaid insurance and taxes
    Appraisal fees
    Credit report fees
    Courier fees
    Attorney fees

An estimate of these fees will be included under your settlement charges. As a buyer, you can request that the seller pay certain fees entirely or that they pay a percentage of the total settlement cost as part of your price negotiation.

Homework

On the final page of your Good Faith Estimate, you’ll have room to do more homework. Although you may have talked to only one lender, you can still investigate other interest rates or options. Take the time to go through these numbers. Refinancing can be expensive and time consuming, so locking in the loan with the best available rate and lost costs can save time and money in the long run.

Now that you better understand your Good Faith Estimate, you will be well prepared to review your HUD Settlement Statement at closing and know what fees and costs you will bear.

source: totalmortgage.com

6 Ways to Fight Rising Interest Rates

Mortgage interest rates have been hovering between 3.5 and 4 percent for the past 18 months, refusing to rise as quickly as many forecasters had predicted. That means many have been able to lock down favorable rates without the threat of a drastic increase hanging over their heads.

However, later this year, the Federal Reserve is expected to raise its benchmark rate, which has held near zero since December 2008. This can happen as soon as its next policy meeting in mid-September or, more likely, in December.

The long awaited increase is a good sign for the economy as a whole; it’s continuing to expand at a moderate pace, driving solid job gains and declining unemployment. For real estate markets, though, the news isn’t so great.


Likely, the rate hike will be enough to drive rates on 30-year fixed mortgages to well over 4 percent and perhaps closer to 5. With this hike looming, now is a good time for buyers and refinancers to consider their options. These include:

1. Adjustable Rate Mortgages (ARMs). ARMs are a great way to keep rising rates from busting your budget, at least for the first five years of the loan, when you pay little or no interest. When it resets, you can take sell or take your chances on a refi if you have enough equity. ARMs are a good idea if you don’t plan to own the house a long time.

2. Fix up Your FICO. When they get loan terms from their lender, many buyers wonder what happed to the super low teaser rates their lender promised in its advertisements. Those “bait” rates are real, but they’re just not available to everyone—just those with fantastic FICOs and moderate-sized loans.

Lower FICO scores translate into higher risk for lenders and their investors, so they raise rates to compensate for the risk. By working hard to improve your credit score—reviewing your history, paying bills on time, avoiding taking too much credit, keeping credit card balances down—you can raise your FICO and lower the interest rate on your mortgage.

3. Increase Your Down Payment. By increasing your down payment, you fight rising rates two ways. First, you reduce the amount you will have to borrow and, in turn, the amount of interest you will have to pay. With a smaller loan you may also get a lower interest rate; smaller loans reduce lenders’ risk and a lower rate can result.

4. Lock Your Best Rate. Rates change every day and they vary slightly by location. You can improve your chances of getting the best possible rate during the time that passes between your loan approval and closing by asking your lender for the right lock your rate, usually within a 30 day period. Follow mortgage rates as closely as you can and time your lock to coincide with a low point.

5. Buy a Cheaper House. If the house costs less, your loan is going to be smaller. With a less expensive house, you may also be able to put more down, reducing your principal even more. With a smaller loan, you should also realize a lower rate.

6. Shop for Rates. Lenders compete aggressively by the rates they offer. Like any business, some will offer more favorable rates than others to bring in more business. Also, lenders with access to capital at lower cost can afford to charge lower rates. Shop around for the best rates by sharing your FICO score with the lender so that they don’t quote you a “bait” rate you will never see.

source: totalmortgage.com

What is a Mortgage Broker?

At some point in the mortgage process, you might find yourself wondering what a mortgage broker is, and why you might choose to work with them.

Who they are

Put simply, a mortgage broker is a middleman between the borrower and the bank or mortgage lender. They’re kind of like a borrower’s Sherpa, leading them to the summit of the perfect loan.

It doesn’t matter if a client is looking to refinance or purchase a new home, the mortgage broker will do their part to help them qualify. Just remember that since they are a middleman with no affiliation to anyone except themselves, they will inevitably take their slice of the pie (more on that later).

What they do

The first thing they will do is gather all of the necessary information. That means income, asset, and employment documentation, plus a credit report. The mortgage broker will then look over all of the borrower’s information and decide what the best way to obtain financing will be. This means, they’ll advise the borrower on the loan amount, the loan-to-value ratio, and the type of loan.

When the specifics of the loan have been decided on, the broker will submit the loan to a lender they work with to gain approval. Throughout the process, the broker will talk with the bank and the borrower to make sure both parties are on the same page.

Pros

One of the major benefits of using a mortgage broker is that they can shop around with multiple banks and lenders to find the best rate/loan program. This is in contrast with a loan officer, who’s confined to the lender they work for, so if you get declined that’s the end of the road.

With a mortgage broker, if a borrower gets declined they’ll just move on to another lender. It’s also possible that a mortgage broker will be working with fewer clients, and will therefore be more available for any questions/concerns a borrower might have.

Cons

In reality, there’s no guarantee that they’ll search high and low for the best loan. It’s entirely possible that they’ll steer the borrower toward a loan that makes them the most money.

It’s important to ask for multiple quotes from as many lenders as possible. Of course, the only way a borrower can be sure they are getting the best deal is to do their own research.

How they make their money

There are a few different ways a mortgage broker can get paid. Typically, they charge loan origination fees and/or broker fees. This usually amounts to 1-2% of the loan, and can either be paid up front or added into the loan. Because of the Dodd-Frank Act—no hidden fees are allowed—the broker must be willing and able to tell you exactly what each and every fee is for.

source: totalmortgage.com

How to Get A Mortgage With No Down Payment

Without adown payment doubt, the biggest hurdle first-time home buyers face is saving for a down payment. It makes sense that reducing or increasing the amount needed for a down payment has a direct and immediate impact on demand, more than changes in mortgage rates or even home prices.

However, with recent changes in lenders’ loan offerings and new government programs designed to stimulate demand with lower down payments, it’s hard for new buyers to know what to expect.

Down payments 101

Many buyers think that down payments are higher than they really are. A recent national survey found that 36 percent of consumers believe that a 20 percent down payment is always required. On the contrary, another survey by RealtyTrac found that the average down payment in the first quarter of 2015 was 14.8 percent of the purchase price.

You can get a much lower down payment of 3 to 3.5 percent by using one of three government programs offered by FHA, Fannie Mae, and Freddie Mac. However, these programs require buyers to take out mortgage insurance policies, which can substantially increase borrowers’ the upfront and monthly costs.

Down payment assistance

What most buyers don’t know is that they can get a loan with no down payment at all. Some 70 percent of U.S. adults are unaware of down-payment assistance programs available for middle-income homebuyers in their community, according to a recent national survey commissioned by NeighborWorks America. Meanwhile, about 87 percent of homes are eligible for down payment assistance from 1,250 housing agencies and program providers.

In a recent study of 370 counties, the average amount of down payment help was $10,443, on average 6.84 percent of the median home sales price. Homeownership programs come in all shapes and sizes and are designed to meet the housing needs of individual communities and buyers, ranging from saving on a down payment and getting a lower interest rate and annual tax credit.

A great example of one of these programs is the Illinois Housing Development Authority’s (IHDA) new @HomeIllinois program that offers $5,000 in down payment help to credit-worthy borrowers. It’s available to first-time homebuyers, repeat buyers, and homeowners looking to refinance. Available statewide, the program also offers competitive interest rates, lender paid mortgage insurance and tax savings. Eligibility is based on income, with annual income limits of up to $94,500 for households of two or less and $108,675 for households of three or more.

Other options

One little-known homebuyer program is gaining in popularity. Mortgage Credit Certificates (MCCs) provide eligible homebuyers up to a $2,000 tax credit every year for the life of the loan. MCCs have been around for years, but now they are on the rise and they can often be used in conjunction with a down payment program.

Basically, an MCC is a tax credit program that allows eligible homebuyers to claim a percentage of the mortgage interest they paid as a tax credit on their federal income tax return. Because it is a tax credit and not a tax deduction, mortgage lenders may use the estimated amount of the credit on a monthly basis to increase the buyer’s qualifying income. The percentage of mortgage credit allowed varies depending on the state or local housing agency that issues the certificates, but the credit itself is capped at a maximum of $2,000 per year. Plus, the buyer may continue to receive an annual tax credit for as long as they live in the home and retain the original mortgage. That’s up to $2,000 per year, every year.

Buyers looking for homeownership assistance programs in their communities, including no or low down payment programs can find them at http://downpaymentresource.com/, a site that helps potential homebuyers become qualified buyers by connecting them to down payment assistance funds they may not have otherwise known existed.

source: totalmortgage.com

New Closing Forms Encourage Shopping for Services

If you’re in the process of looking for a home and you expect to close after October 1, 2015, you may be one of the first to use new mortgage disclosure forms that make it easier to save on closing costs.


Over the past two years, the Consumer Finance Protection Bureau has developed new forms required by the TILA and RESPA acts. TILA-RESPA stands for Truth in Lending Act and Real Estate Settlement Procedures Act, two federal laws that govern real estate transactions. The new forms are designed to reduce paperwork and help consumers better understand their options on closing costs, choose the deal that’s best for them, and avoid costly surprises at the closing table. They replace two different forms that contained duplicative and sometimes overlapping information.

The required loan documentation consists of two new forms: the Loan Estimate and the Closing Disclosure to ensure compliance.

The Loan Estimate. This form must be provided to borrowers within three business days after they submit a loan application. It replaces the early Truth in Lending statement and the Good Faith Estimate, and provides a summary of the key loan terms, including monthly payments and estimated loan, closing costs, title insurance, origination costs, appraisal, recording taxes, and settlement services. Consumers can use this new form to compare the costs and features of different loans.

The Closing Disclosure. This document provides a detailed accounting of the transaction and is sent to borrowers three business days before closing. It replaces the final Truth in Lending statement and the HUD-1 settlement statement.

Though the CFPB conducted more than two years of extensive research, testing, and review to find out how to create mortgage disclosures that do what the law intended them to do, the changes have generated concern and criticism from real estate agents and lenders. Some argue that they haven’t had time to make changes in the software programs they use to prepare the information.

Some of their other concerns are:

Not enough time to verify estimates. “What the CFPB is doing [by mandating the three-business-day deadline] is forcing lenders to give disclosures based on information that is unverified. The problem is that three days after an application is received, the lender doesn’t even know what loan program the borrower belongs in. Further, they don’t even know yet if the income figures the borrower provided are accurate,” says one lender.

The CFPB allows lenders can provide “re-disclosures” to report changes in the initial estimates, but that may negate the value of the three-day disclosure and raise questions about the need for speed.

Lenders have a similar concern with meeting the requirement that the new Closing Disclosure form be received by the borrower no more than three business days prior to the closing.

Major software changes. Lenders rely on loan origination systems or software platforms to underwrite loan sand prepare critical documents like the new closing forms. The new forms require major changes in software, and many lenders have been afraid they will not be ready or able to take loan applications in time for the launch of the new forms.

According to the CFPB’s own estimates, implementing this new process will cost the settlement services industry $67.8 million over the next five years. It will cost lenders $207 million per year for the next five. That brings the total price tag for implementation to more than $1.3 billion.

No last minute negotiations or changes at the closing table. Three days before settlement the lender may not know every detail or final disclosure. Further, the negotiations between seller and buyer may still be open, so how can a lender provide an accurate disclosure? The only answer is to require all negotiations be completed in time to be included in the final Closing Disclosure.

Given the possibility of changes triggering another waiting period or a last-minute change requiring lender approval, Realtors should assume it will take an additional 15 days to complete a closing, say analysts at the National Association of Realtors. That means if closings in your state typically take 30 days, allow 45 days. Over time, as the industry adjusts to the changes, those additional days might no longer be necessary.

With nearly half the mortgage industry unprepared for the original August 1, 2015 start date for the new forms, the CFPB has delayed implementation to give the real estate industry two more months to adjust to the changes.

source: totalmortgage.com

What to know about APR & Mortgage Fees

Mortgage terms can be confusing. But when you break them down into digestible pieces of information, they actually make sense. And the more informed you are, the greater the chance you’ll make a wise home-buying decision.

One term guilty of constantly confounding hapless homebuyers is APR. It stands for Annual Percentage Rate, and can be spotted in a mortgage rates table (thanks to the Truth in Lending Act) next to its partner in crime, the interest rate. While both terms share the prized percentage sign, they have an important distinction.

APR vs Interest Rate

 

It all has to do with fees. The interest rate is what it costs you to borrow money from your lender without fees. On the other hand, the APR is what it costs to borrow money from your lender with fees. This is why the APR is always higher than the basic interest rate.

So what are the fees?

 

Fees are a tricky beast. Different states, markets, and lenders all have their own variations, which make it harder to discern if you’re getting a good deal. As always, the more you know makes it less likely you’ll get swindled. At the very least, you should be aware of these basic fees.

Closing costs are miscellaneous fees paid to all parties involved with the sale of the home (e.g. lender processing loan, title company for handling the paperwork, a land surveyor, local government offices for recording the deed etc.). These costs can amount from anywhere between 1% and 8% of your loan amount, but usually fall between 2% and 5% of your loan amount.

Broker fees are just what they sound like: a fee charged for the service of a broker. Generally, the fee is between 1% and 2% of the loan amount. There shouldn’t be any surprises either, the broker is required to disclose all fees up front, and should be able to tell you exactly what each fee is for.

One advantage of choosing a direct lender, is you don’t have to pay for broker fees. Because with a direct lender, you are the one doing the labor, and therefore, don’t have to pay for the work the broker would be doing. There are still fees for processing the loan, but a broker may still be more expensive.

Mortgage points

 

There are two types of mortgage points.

Discount points are prepaid interest on the mortgage loan. For every point, your mortgage rate drops down (usually .25%). Typically, borrowers can pay between 0 and 4 points. And because the Annual Percentage Rate is the total cost (mortgage rate + fees) of your mortgage, lowering your mortgage rate translates into a lower APR. Discount points are also tax-deductible.

The main takeaway is that by paying more up front, you get a lower interest rate. This is most useful a) if you have the available cash to put down, and b) if you plan on staying in your home long term. If you’re trying to pay the lowest possible price upfront, then choose the zero-point option.

Origination points exist so the lender can cover the cost of evaluating, processing, and approving your mortgage. They are not set in stone, so depending on your lender, you might be able to negotiate the number of points.

Back to the APR

If two loans are set for the same period of time, the borrower can compare APRs, or interest rates, and find out which loan is the better deal. For example, a loan with a 3 percent interest rate will have a lower monthly payment than with a 5 percent interest rate. Similarly, a loan with a 3 percent APR will have a lower total cost than it would with a 5 percent APR.

It’s important to note that APR assumes you will stay in your home for the full duration of the loan. And since it would be impossible to factor in whether or not a borrower will refinance, it assumes the borrower will not. If that wasn’t enough, it also assumes that the borrower doesn’t make any extra payments toward their mortgage. These assumptions are why some say that APR can be misleading.

Things can also get a little tricky when you take into consideration the fact that most homeowners only end up staying in their home for a relatively short period of time. What’s the big deal? Well, a loan with a higher APR actually has lower costs over the first few years (because you didn’t pay for discount points, which would have lowered your APR).

So if you know you’re only going to stay in a home for a little while, a higher APR would be your best bet. But if you know you’re going to stay in your home for the entire life of the loan, the lower APR is what you want (because over time, paying upfront for the discount points to lower your interest rate will save you money).

It can definitely get complicated when you plan on staying longer than a few years, but not for the whole life of the loan. With situations like that, it pays to have a competent lender who will help you work out which loan is best.

The bottom line:

 

When searching for the best deal on a mortgage, comparing APRs, due to some possibly false assumptions (e.g. not refinancing, no extra mortgage payments, staying for the full life of the loan), might not be as prudent as say, comparing mortgage rates and fees.

But if you still want to exercise all options, and choose to compare APRs, it’s crucial that you take into consideration how long you plan on staying in your home. Also, because some of the calculations can be complex, make sure you choose a lender that is willing to walk you through the math.

source: totalmortgage.com

How to pay off debt in 7 smart ways

MANILA - Do you think you are carrying too much debt? If your bills are piling up, and you are also getting calls from creditors, you should be alarmed.

Having too much debt can be stressful. While overcoming your debt problem may not be easy, especially if you are relying on a limited income, it can be done. You will need discipline and sacrifice and we have charted a road map for you below.

Here are seven debt-defying steps to set you on your way to financial freedom:

1. Know how much debt you have. When you are struggling with too much debt, you may forget how much you really owe and the details of the debt you’ve accumulated. List down all your debt, the interest rates of each, and the minimum monthly payments required. This information is essential to help you make a workable debt strategy. It also allows you to better track the payments you have to make, and know your real debt situation—which may be much better or much worse than you realize it is.

2. Choose your debt pruning strategy. It is necessary to have a good and realistic battle plan that you can implement. First, identify which debt you should pay off first—the one with the highest interest rate or the one with the lowest balance (you will save more if you retire the debt that charges the highest interest rate.) What works for one person may not work for another, so weigh your options. Once you’ve decided, make additional payments on this debt until it is totally wiped out.

3. Find ways to make additional payments. Study your income and spending patterns to find where you can get the additional money that can go toward debt servicing. This might mean either cutting back on your usual expenses, or finding new sources of income. You’ll have to make some sacrifices—bring down your entertainment budget, eat at restaurants less often, or maybe even postpone that planned vacation. New income sources can come from taking on a part-time job or selling off some stuff you’re not using.

4. Find lower interest rates. Check the interest rates you are paying on your debt. Consider taking out a lower-priced loan from other sources—possibly the bank, or even your office cooperative—to shave off the debt with the highest interest rate. Another option is to negotiate the interest rate with the lender, which you can do by writing a letter to your bank or lender. It won’t hurt to try.

5. Set realistic targets and deadlines. Let’s say you owe P100,000 on a salary of P25,000 a month. Don’t target paying off the P100,000 in four months—you can’t live on zero income and you will only set yourself up for failure. Study your needs and your cash flow to know what is realistic before you set a deadline. Giving yourself a deadline helps define your goal, which allows you to create a strategy and gives you motivation.

6. Don’t take on new debt when you’re managing existing debt. When you are struggling with debt, the worst thing you could do is to borrow some more. This will only push you deeper into the hole you’re in. Work with your creditor and explore other ways for you to manage your debt, as most of them will be more than happy to assist you. For example, they can convert your balance into a friendlier installment scheme that will make it easier for you to be up to date with your payments.

7. Reward yourself. Keep yourself motivated during this time by rewarding yourself once you’ve reached milestones—reaching the halfway mark, wiping out the largest debt, etc. After all, getting over your debt problem is a great achievement that is worth celebrating. It goes without saying, of course, that your choice of reward for yourself should not plunge you deeper into the debt hole. Try declaring a “do nothing” day or spending the day with a friend who makes you laugh the hardest, As the saying goes, the best things in life are free.

Conquering debt requires both a financial and a psychological strategy. Remember that short-term sacrifices could yield long-term benefits, and what can be a better reward than to gain financial independence and freedom from creditors? With discipline, commitment, and good planning, you can overcome your debt woes.

source: www.abs-cbnnews.com

How to Save Money on Your Mortgage Even If You Can’t Refinance

One of the simplest ways to save money on your mortgage is by lowering your interest rate.

This is generally accomplished via a rate and term refinance, where the loan amount stays the same, but the interest rate and loan term are changed.

For example, if you’re currently stuck with a 6% interest rate on your 30-year fixed mortgage, refinancing to a rate closer to 4% will save you some dough each month.

Not only will it reduce your monthly payment, making life more affordable, but it will also result in less interest paid throughout the life of the loan.


Sounds like a win-win, but what if you’re unable to refinance for whatever reason?  Ben Bernanke, I’m looking in your direction…


 You Can Still Save Money


While you won’t be able to lower your monthly payment without refinancing, you can still save a ton of money on your mortgage another way.

Simply making extra payments, biweekly payments, rounding up payments, or implementing a variety of other methods, you can reduce the total interest you’ll pay on your mortgage without a refinance.

Sure, a refinance combined with extra monthly payments would save you even more money, but if you don’t have that option, this is the next best thing.

Imagine you took out a $100,000 mortgage five years ago and got a rate of 6% on a 30-year fixed.

You inquire about a refinance but after some shopping around determine you’re ineligible because your credit score isn’t up to snuff.

Instead of simply giving up, you can make larger payments each month and shave years off your mortgage (and pay a lot less interest).

If you paid an extra $100 monthly after making the standard payment for the first five years of the loan, you’d still save more than $26,000 and shorten the term to just over 23 years.

If you paid an extra $200 per month (after five years), you’d save more than $40,000 in interest and turn your 30-year mortgage into a 20-year loan.

The beauty of the non-refinance route is that you also don’t reset the clock on your mortgage. In other words, you don’t extend the term with a fresh loan. In fact, you do the complete opposite.


 But You Need Money…


There’s one huge caveat to this. You need money! Yes, if you actually want to save money on your mortgage without refinancing, you’ll need to make larger payments.

So for those looking to refinance to free up some cash, this method isn’t for you.

But for those who have extra cash lying around, you can get the same interest savings associated with a refinance by paying extra each month or in one lump sum.

Just keep in mind that the extra payments won’t lower future monthly payments. It’ll just reduce your term and total interest expense.

And who knows – if you pay down your mortgage more quickly now, you might be able to refinance in the future more easily because you’ll have a lower loan-to-value ratio.

source:  thetruthaboutmortgage.com

What Does It Mean to Be Pre­-Approved for a Mortgage?

Wouldn’t it be nice to know what you can afford before shopping for a house? With a mortgage pre-­approval, this is exactly what happens. Getting pre­-approved for a mortgage isn’t required to look at properties or bid on a home but there are advantages to meeting with a lender beforehand.

Pre-approvals help eliminate the guesswork when shopping for a property. Mortgage lenders can determine early on whether you qualify for a home loan and how much you can afford. Therefore, you don’t waste time looking at houses outside your budget.

A pre­-approval also tells realtors and sellers that you’re a serious buyer. It might come as a shock, but some sellers will not accept offers from bidders who are not pre-approved. Since sellers are eager to sell their homes and move on, they don’t want to take a chance with someone who might not be able to get financing.

Pre­-Qualification vs. Pre-Approval

It’s important not to confuse a pre-­approval with a pre-­qualification. Both are preliminary steps in the mortgage process, but there are differences.

A pre­-qualification is an initial assessment of whether you meet the qualifications for a mortgage, but it doesn’t guarantee financing. Pre-­qualifications are based on the information you provide on a pre-­qualifying form, which only asks for basic information like monthly income and an estimation of your credit score.

Understand, however, you can’t get a mortgage off a pre-­qualification. A pre-qualification says you might be a good candidate for a mortgage. A pre-approval, on the other hand, goes a step further. Getting pre­-approved for a mortgage involves completing an official loan application with the bank and going through the underwriting process.


Get started with your pre-approval today

What a Mortgage Pre­-Approval Entails?

With a pre-­approval, the mortgage lender will pull your credit and carefully scrutinize your credit activity and debts. You’ll have to submit your recent paycheck stub and tax returns from the past two years, plus provide copies of bank statements and disclose any assets you have.

Based on all of this information, the lender decides whether you’re eligible for a mortgage, and determines how much house you can afford. A pre­approval letter is the official green light to start looking for a house. If you must choose between a pre-­qualification and a pre-­approval, go with the latter. Unlike pre­-qualifications, pre-­approvals are practically written in stone, providing your credit, job status and income doesn’t change prior to closing.

Avoid Jeopardizing a Mortgage Pre­-Approval

It’s important not to make any significant changes to your personal finances after getting pre-­approved for a mortgage. Something as simple as getting store financing or financing a new automobile can jeopardize a mortgage approval.

This mortgage approval is based on your debt and income at the time of applying for the pre-­approval. Getting a new auto loan or acquiring some other type of debt before closing increases your debt­-to-­income ratio. And with a higher debt-to-­income ratio, there’s the risk of being disqualified for the mortgage. So wait until after closing to apply for financing.

The lender will check your credit about one or two days before closing to ensure no changes to your credit history and score. If everything checks out fine, you can proceed with closing and get the keys to your new house.


source: totalmortgage.com

Thinking about getting a loan? Read this

This article was written exclusively for ABS-CBN by MoneyMax.ph, the leading online comparison portal for car insurance, credit cards, and other financial products. Find out more at MoneyMax.ph.

MANILA, Philippines - There are certain goals that cannot be realized without a little additional financing. Businesses require capital before they get off the ground, or financing the purchase of a car is a little less difficult than dropping a bulk amount.

These are just examples of situations where you might consider taking out a loan.

Banks have several kinds of loans available to clients, while Pag-IBIG and SSS also have loan programs available. These products may be common across establishments, you need to look at which of these has the lowest interest rate for the amount you’d like to borrow.

A lower interest rate means you pay less annually and paying on time guarantees you a good rating as a client.

Here’s a quick guide to help you decide which loan fits your needs.

Mobile users can view the desktop version of the slideshow here.

source: www.abs-cbnnews.com

How Does Student Debt Impact Your Mortgage?

Let’s say you’re a recent college grad. You’ve landed your first real job (or maybe you’ve been working it for a while already) and after years of dorms and apartments, you’re realizing you might as well start building equity in a place of your own.

You wouldn’t be alone. Though you’ll see articles all over the place insisting that millennials just aren’t interested in buying homes, a closer look at the data says the opposite is true actually true.

However, there’s one small hiccup: student loan debt. In 2013, the average student borrower graduated $28,400 in debt, which will almost certainly lead to problems when they try to qualify for a mortgage. So what can you do if all this describes you?

First, let’s take a closer look at the why of this problem.

How does student debt interfere with getting a mortgage?

When lenders do all the math to figure out whether or not you’ll be able to make your monthly payment, they take special care with something called a debt-to-income, or DTI, ratio.

This is almost exactly what it sounds like—it allows banks to get a feel for how much of a borrower’s income is already accounted for by other debts. Ideally, your DTI ratio should be 43% or below, as that’s the cutoff point most banks will use.

Even if your loan is still deferred, which means you haven’t begun payments on it yet, lenders will still estimate monthly commitment from you, though it may be even higher than the standard minimum payment.

What can you do?

Well, there’s the obvious, solution: pay down your debt before applying for a mortgage. Of course, obvious doesn’t always mean easy. Paying off your student loans will take time and careful budgeting, especially if you’re trying to save up for a down payment at the same time. That may mean some serious cutting back on living expenses or avoiding big purchases.

Of course, the other way to improve your DTI ratio is to increase your income. Earning a raise, moving on to a better paying job, or even taking on a part time one are all ways to do just that. Make sure you do so several months before applying, though, or your lender may not count the income.

If neither of those options work for you, you can always try to consolidate your student debt, or convince a parent to co-sign with you. Whatever you do, though, make sure to keep your credit in good standing, or you’ll have to add “bad credit” to your list of problems to fix.

source: totalmortgage.com

Taking a Loan to Finance Your Business Project

There is more to embarking on a project, it is not just about having a good and pragmatic business idea, a person venturing into business must also know where to find resources most especially capital. Knowing where to obtain capital resources is what i consider as the greatest talent of a successful entrepreneur. This Article would discuss the stages involved in a Successful loan application to enable you finance your business project. This Article would also discuss how to repay your loan to enable you qualify for another loan in the future.

1. Upgrade and repair your credit report

Your Credit Report is your Credit history; it is the record of your attitude as regards borrowing money and repaying at the right time. Order a free copy of your Credit Report and search for negatives. The most common negatives are late payments, repair this negatives by paying the necessary penalties.

2. Justify a stable source of income

There is a popular saying that people who fail when confronted with little challenges would most certainly fail when confronted with major challenges. You cannot persuade a lender to give you a loan except you can persuade such a lender that you have an existing source of income that will ensure that you repay the loan as at when due with or without the success of the project you intend to embark on. This must be contained in your loan application if you are to get approved.

3. Ascertain the amount of money you need to borrow

The amount of money you need to borrow would help you ascertain who would be your most likely lender. It may also influence the type of loan you would choose to apply for.

4. Research loan types (secured/unsecured)

A loan may be secured or unsecured. Secured Credit are credit advanced with the deposit collateral security documents. Failure to repay the loan as at when due will give your lender ownership of such collateral security. Whereas an Unsecured Loan does not involve collateral security. Secured loans always have lesser interest rates than unsecured loans. They also have a longer time frame for repayment. Unsecured loans are beneficial to people without collateral security or if your investment is an high yield venture that will enable you repay your loan within a short period of time. You need to determine which of these types of loans is best for your business.

5. Apply to the right lenders

When making a loan application, consider two major financial institutions. Banks and Credit Unions. I would recommend a Bank. When making your application, apply to two or three banks. You will most certainly be approved by each of the banks you apply to if you have taken time to prepare very well for your application. You are however to receive this Loan from only one of the banks. The reason why i would suggest you apply to more than one bank is that it gives you the benefit of choosing which bank has the best loan terms that is convenient for you.

6. Pay origination fees on time

When you have received your loan, take note that some banks would require you to pay origination fees on the total sum to be repaid to the bank. Origination fees do not apply to all kinds of loans and when they do, they are always very small and unharmful to your purse. Endeavour to pay it on time as doing so will improve your Credit rating.

7. Pay back your loan as at when due

Never disappoint your lender; you may need them again in future. Keep to payment schedules and never miss a deadline. It will give you a positive credit score and ensure that you are automatically click here to approved when you submit your next loan application.

source: everybodylovesyourmoney.com

Rejected for a Mortgage? Here Are Your Next Steps

There’s nothing worse than having a house all picked out, only to hear back from the bank that you’ve been rejected. You’re far from alone, though. In 2013, about 14.5% of all new purchase loans were denied by lenders, and that number climbed to 22.7% for refinances.

Where you go from here depends on many factors—why you were rejected, what your individual finances look like, etc.—but here are a few ideas you should definitely consider.

Try a different tactic

Occasionally, it is possible to turn around and apply with a different lender who has fewer restrictions. This is because some lenders tack additional guidelines onto those that are required by law, making it more difficult to qualify. On your second go around, try a local bank—they often more willing to work with individuals.

If that isn’t an option, you may want to consider applying for a different loan program. A normal 30 year fixed may be considered the standard, but that doesn’t mean it’s for you. Mortgages backed by the government—FHA, VA, and USDA loans—tend to have less strict requirements (FHA, for instance, allows a credit score as low as 580).

Work on your credit

Credit issues are one of the top reasons lenders reject loan applications. Often, people only realize their credit is a problem when the time comes to make a large purchase, but ideally, you would be keeping an eye on your credit situation well in advance.

If your problem is your credit, start by paying off as many cards as you can (but don’t close them immediately—your score takes into account how much credit you have open to you vs. how much you’ve used). Even once you’ve cleaned up your act, it can take time for your credit to recover—one to three months, or even longer if you’ve done severe damage.

Troubleshoot your appraisal

Another very common reason loans are rejected is that the appraisal came in too low, leading the bank or lender to think that the property isn’t worth the investment on their part. Sometimes a low appraisal is a fluke. Often, all you can do is move on to a different lender, or, if it happens a second time a different house.

Find a cosigner

If you’re having trouble qualify for credit, debt, or income reasons, asking a close relative to cosign the mortgage with you may be the helping hand you need.

This isn’t always recommended, though. Cosigners are legally responsible for the debt, too, which can raise their debt-to-income ratio and make it difficult for them to make large purchases in the future. Plus, money and family don’t typically mix well.

source: totalmortgage.com

Credit Card Mistakes That Can Keep You From Getting a Mortgage

If you’ve worked consistently for the past two years, and you’ve been saving your pennies for a downpayment and closing costs, you may feel nothing can stand in your way of qualifying for a mortgage. And in all likelihood, you’re the ideal candidate.

However, what you may not realize is that certain credit card habits can stop a mortgage approval in its tracks. Not to say you can’t get a loan, but a bank may hold off approving your application until you get a handle on your credit cards. Here’s a look at five credit card mistakes that hurt your chances of buying a home.

1. Maxing out your credit cards

Unfortunately, making minimum credit card payments might not be enough to qualify for a mortgage loan. The lender looks at your entire credit history, and if you have maxed out credit cards, this raises your debt-to-income ratio and impacts whether you’re able to qualify for a mortgage, or how much you receive from a bank.

Basically, the bank calculates the percentage of your monthly debt payments and compares this figure with your gross income. If your credit card payments are higher due to maxed out accounts, your debt-to-income ratio may exceed what’s allowed by the lender, and the bank may not approve your application until you’ve paid off some of your accounts.

To avoid this problem, pay off credit cards every month, and make sure your balances do not exceed 30 percent of your credit line.

2. Past due accounts
You credit history might be stellar today, but if any credit card accounts have been 30 days or more late in the past 12 months, a mortgage lender may not approve your application at this time. It only takes one or two recent delinquent accounts to delay a home purchase.

Lenders are cracking down on late payments, and they typically allow no more than one or two 30-day late payments in a 12 to 24-month period (based on the type of mortgage).

3. Closing credit card accounts

If you’re weaning yourself off credit cards, you might close accounts to avoid additional debt. In hindsight, this is a good plan. But unfortunately, closing a credit card account can increase your credit utilization ratio, which can also drive down your credit score.

Credit utilization ratio is your total available credit in relation to your total credit lines. Let’s say you have two credit cards each with a $1,000 credit line (a total credit line of $2,000). One credit card has a $1,000 balance, and the other card has a zero balance. In this case, your credit utilization ratio is 50 percent, since you’re using half your total available credit.

In an effort to control spending, you might decide to close the account with a zero balance. Unfortunately, closing this credit card account increases your credit utilization from 50 percent to 100 percent — in other words, you’re now using 100 percent of your available credit, and your credit score will suffer as a result. The way credit scoring models work, the wider the gap between your balances and available credit, the better. Even if you decide not to use a credit card, it’s often better to keep accounts open.

4. Applying for too many accounts

Applying for too many credit cards doesn’t look good from a lender’s standpoint. When lenders check your credit history, the bank also looks at your number of recent credit inquiries. If you’ve applied for multiple credit cards in the span of just a couple of months, the bank may think you’re experiencing some type of financial hardship and in desperate need of credit.

Plus, each inquiry can reduce your credit score by approximately two to five points and they stay on your credit report for two years.

5. Being an authorized user

As an authorized user, you have permission to use another person’s credit card. The problem is that this credit account also appears on your credit report. Any action by the primary accountholder person—whether good or bad—affects your credit.

So, if the primary account holder pays the statement late or maxes out this credit card, this can hurt your credit score and make it harder to qualify for a mortgage. If you’re thinking about purchasing a house, request to have your name taken off any accounts where you’re an authorized user. Unfortunately, this doesn’t work if you’re a joint owner on the account.

The Bottom Line?

Buying a home is a big step. If you’ve spent years preparing for this move, don’t let bad credit card habits wreck your dream. If you use credit wisely and avoid maxing out your accounts, you’ll have a better chance of qualifying for a mortgage.

source: totalmortgage.com

Reverse Mortgage—A Loan of First Resort

Typically the reverse mortgage has been seen as a “loan of last resort.” The idea stems from very outdated assumptions about closing costs and, quite frankly, some major ignorance about how the loan works.

Over the next few weeks, I will be doing a series of articles showing the value of using a reverse mortgage line of credit in retirement planning. As with most financial tools the sooner you start the better the return!

If you, like many baby boomers, purchased or refinanced in your 40s or later and used a 30 year fixed rate mortgage, you will be paying a mortgage into your retirement years. This payment coupled with a common decrease in income during retirement could open you up to foreclosure or unnecessarily selling your home.

The secure future reverse mortgage is a simple plan that overcomes the problem while allowing you to create a line of credit that will give you the comfort and security of liquid assets throughout your retirement years.

To see how it works, take a look at this video:






The line of credit created in this model does not require any extra savings. You simply make the same payment you are presently making on your mortgage.
The benefits:

• The ability to miss or reduce payments. If finances are tight you can reduce the monthly payment or stop making payments. No fear of foreclosure through nonpayment.
• The option to borrow at any time from the line of credit.
• The ability to borrow large amounts, tax-free. No need to be re-approved.
• Insurance against home value decline. If your home’s value goes down, a traditional HELOC can be frozen or cancelled.
• Security against interest rates rising. If they do rise, so does the growth in the Line of Credit.
• Protection from market volatility. If your IRA or 401K tanks with the market, the line of credit can meet needs until it rebounds.
• The security of a government insured line of credit. If the bank fails or the economy crashes the line of credit is still available, even if the line is higher than the home’s value.

source: totalmortgage.com