Archive for October, 2007

It is easy to become overwhelmed at the mere thought of acquiring a mortgage, let alone all of the processes involved in doing so. Getting a mortgage is a long term financial investment, so it is very important that every area is covered - because the decisions that you make today in regards to a mortgage, well, you will be living with them for many years to come. Please remember that we are here to help you, to answer any questions that you may have, and we are available at your convenience.

We have put together this series of facts and common questions to help educate you with the mortgage process.
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1) Prepare your documents and finances

The first step is to obtain and review your credit report. You can receive a free credit report by visiting annualcreditreport.com and requesting it from any of the major credit bureaus; Experian, Equifax or Transunion. Your credit report will be used by your lender as a reflection on how you have managed your finances in the past and how you manage them presently. If you have a good credit rating, this gives you added leverage when negotiating the terms of your loan. It is important to review your credit report for errors as it is fairly common to have some on your credit report. If you find any errors, try and get them addressed before working out the terms of the loan.
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Acceleration Clause - A provision in a mortgage contract that gives the lender the right to demand the entire outstanding balance of a loan if a monthly payment is missed.

Adjustment Interval - with an adjustable rate mortgage (ARM) it is the time between changes of the interest rate and/or monthly payment.

Adjustable Rate Mortgage (ARM) - A mortgage loan in which the interest rate and/or the payment can change periodically over the life of the loan. These changes are usually subject to a predetermined cap.

Amortization – The payment of a mortgage loan through monthly installments of the principal, interest and any escrow amount.

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What is an advance fee bad credit mortgage loan?

An advance fee mortgage loan is a loan where the creditor requires the borrower to pay and advance fee to secure a loan. Advance fee mortgage loans have been associated with fraudulent loan schemes, which are against the law.

How do I know if a bad credit mortgage loan is legitimate?

• Beware of promises of “easy credit”. While these offers are tempting to people with bad credit, there is no such thing as easy credit.
• A loan you can get without a credit check or without a sizeable down payment does not exist. If a borrower could afford the down payment required for a no credit check loan, he or she would probably not have bad credit in the first place.
• According to the Federal Trade commission, “Legitimate lenders never ‘guarantee’ or say that you are likely to get a loan or a credit card before you apply, especially if you have bad credit, no credit, or a bankruptcy.”
• You should have a credit offer in writing before you are required to pay anything for the loan.
• Do not accept bad credit mortgage loans from telemarketers.

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What is a bad credit mortgage loan?

Bad Credit mortgage loans are loans for people who have low credit scores. Bad credit mortgage loans usually have high interest rates as a low credit score creates a greater risk for the lender as it shows a pattern on inconsistent payment in the past.

What is a credit score?

A credit score, also known as a FICO (Fair ISAAC & Company) score is a system of analyzing credit and debt. Lenders use credit-reporting agencies that supply customers FICO score to help them determine if the customer is credit worthy. It determines whether the customer will receive a bad credit mortgage loan or a traditional mortgage loan.

How are credit scores determined?

The credit reporting companies use a formula to determine credit scores. The formula, however, is kept confidential (thanks to a US Congress ruling). Generally, if you make your payments on time, and do not over extend your finances by spending more than you make, you will have a good credit score.
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What is a bad credit mortgage loan?

A bad credit mortgage loan is also called a sub-prime mortgage. This means the rates and fees are less desirable than a standard mortgage. A bad credit mortgage loan is a loan program designed for people who have especially bad credit. Bad credit mortgage loans are very risky for lenders; therefore, the borrower will be required to pay higher interest rates, prepayment penalties, and higher closing costs. Although a bad credit mortgage loan may appear to be undesirable, it may be the only option for a person with a history of late payments and defaults. Read the rest of this entry »