The Handy Investing Answer Book. Paul A Tucci

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СКАЧАТЬ because you owe more on the balance of your home mortgage than you can make when you sell the house today.

      How does increasing my down payment help protect me from going “underwater”?

      Increasing your down payment provides some protection to you because if you put more money down to purchase the house, you owe less money on the mortgage in the future, and when it is time to sell, you will be able to sell at the market price with less risk of owing more than the house is worth.

      What tax advantages does home ownership provide?

      One of the great benefits of home ownership is the tax-shielding aspect of having a mortgage. Essentially, the government allows you to deduct, or not count, the amount of mortgage interest against your income that you pay in one year. Another sizable advantage—and one of the principal benefits of home ownership—is that up to a certain capital gain ($500,000 for a married couple), you do not have to pay taxes on the gain in the value of your house. If you itemize deductions, you may also deduct your property taxes when you file your income tax returns.

      What is the general rule for obtaining a home loan?

      The general rule is that a good borrower can afford monthly payments—including principal, interest, insurance, and taxes—equal to 25% of his gross income. Some experts believe that you can have a debt income ratio as high as 28% to cover your mortgage, insurance, and taxes. You should also have a total debt income ratio (of all of your debts plus the mortgage payment) of less than 36% if you wish to qualify for a mortgage.

      What is “mortgage fraud”?

      Mortgage fraud involves a crime committed in order to secure or grant a mortgage, falling into two categories: misrepresenting information on a mortgage application (59% of all cases), and appraisal-related misrepresentation (33% of all cases).

      Which states lead the nation in mortgage-related fraud?

      According to a report issued by the Mortgage Asset Research Institute, Florida, New York, California, Arizona, and Michigan lead the nation in mortgage fraud.

      What percentage of buyers ultimately pay cash to purchase an existing house?

      In 2010, more than 25% of all existing houses sold were purchased by cash buyers, who didn’t need or want to obtain a mortgage.

      Why do mortgage companies, banks, and finance companies require homeowner’s insurance?

      Mortgage companies, banks, and finance companies require homeowner’s insurance because they technically own your home, and want to be sure they get paid for the mortgage loan plus interest, even in the event the house burns down. The insurance will cover the costs to replace the house, and ultimately the homeowner will be able to continue to pay the mortgage or sell the house.

      What types of mortgages are available to consumers for a home purchase?

      There are many types of mortgages available to consumers to purchase a home, depending on your financial situation, including fixed-rate mortgages, FHA loans, interest-only loans, and adjustable-rate mortgages.

      What is a fixed-rate mortgage?

      A fixed-rate mortgage has a fixed interest rate for the period of the loan, and allows you to pay off the loan over a period of time. Such amortization periods can be 10 years, 15 years, 20 years, 30 years, and even 40 to 50 years.

      What is the distinction between the different loan periods?

      The shorter the period of the loan, the higher the monthly payments, and the less interest you have to pay over time, since you are borrowing and using the money over a shorter period of time.

      What is an “FHA mortgage”?

      The Federal Housing Administration, which provides mortgage insurance through FHA-approved lenders, is the largest insurer of residential mortgages in the world. Depending on the state in which you live, the amount you can borrow for a mortgage may differ.

      Who uses FHA mortgages?

      FHA mortgages are used by first-time homeowners because they require a smaller down payment than conventional mortgages.

      How long must I pay for mortgage insurance with an FHA loan?

      FHA loans require the borrower to pay for the insurance for five years, or until the loan-to-value ratio reaches 78%, whichever is longer.

      What is a loan-to-value ratio?

      A loan-to-value ratio is the loan amount divided by the house’s selling price.

      What is “mortgage insurance”?

      Mortgage insurance protects lenders from losses if a mortgage is not paid in full. Depending on the amount of your down payment to purchase a home, you may be required to obtain mortgage insurance until you have paid off enough of the loan, minimizing the risk of defaulting on the loan.

      The Federal Housing Administration (FHA) is the largest insurer of mortgages in the world and a great resource for first-time home buyers.

      What is an interest-only loan?

      It is a loan that allows a person to pay, for a period of time, only the interest on a loan. At the end of this period, the borrower must make a balloon payment of the value of the entire loan, or refinance the loan into a conventional loan.

      What is an adjustable-rate mortgage (ARM)?

      An ARM offers a fixed-rate of interest for a short period of time, usually three, five, or seven years. At that point, the interest rate may change up or down, depending upon the index to which the interest rate is tied. These loans also have limits as to how high the rate can change in a year, and in the life of the loan. The borrower may continue paying the loan at this variable or adjustable-rate, or may refinance the loan to a fixed-rate conventional mortgage.

      What are the steps involved to get a mortgage?

      The first step is to order your credit report, to discover if it contains any errors and/or inaccuracies. The bank will also order its own copy of the credit report to initiate your loan. The credit report will be used by the loan officers to determine whether you are a good candidate for a loan, as well as how large a loan you can obtain. Next, it is important to have a clear picture of all your debts—the amounts of the balances, and the monthly payments. You should also have your most recent pay stub, showing your current income, and the last two to three years of your IRS W-2 forms, because as your income will be used to determine your eligibility. You should also have your most recent bank statements and investment account statements, showing your most recent balances. At this point, you should also know how much money you will use in cash toward a down payment on the loan.

      Does it matter to lenders how large a down payment I will require?

      The larger your down payment for a house, the more favorably your lender will consider your mortgage application, and the better your terms will be. You will also benefit from paying less interest over the life of the loan.

      Should I pay down my debts before I apply for a mortgage?

      If at all possible, in order to reduce your normal monthly expenses, it is a good idea СКАЧАТЬ