What is an Assumable Mortgage?

In an assumable mortgage, a buyer is able to take over the seller’s existing loan, essentially taking the place of the seller. The loan balance remains the same and hopefully, so does the interest rate.

Types of Assumable Loans

So, what types of loans today are assumable? Many ARM’s have an assumability option, although you will have to check with your broker or lender to find out for certain. The advantages of taking out an assumable loan is seen when you’re ready to sell your home, and a qualified buyer can avoid the closing costs of obtaining a first mortgage. Also, your mortgage may carry a rate below what the market is offering, effectively increasing the value and marketability of your home. Fixed rate conventional loans are less likely to be assumable because lenders have been burned in the past having to honor a low interest rate during a time when the market interest rates are much higher. That is when mortgages started carrying “due-on-sale” clauses.

FHA and VA Loans

The majority of loans that are assumable are FHA and VA loans. Since the late 1980’s, lenders have required that the new borrower meet the lender’s qualification requirements. Previously, FHA and VA loans had been assumable by anyone. There are three levels of assumption with different sets of liabilities and obligations. They are assignment, subject to, and novation. Look for future articles here that will examine these differences more in-depth.

Fees and Rate Adjustments

Check with the lender to find out what fees or rate adjustments are required in the mortgage assumption. Depending on the terms of assuming the mortgage, it may make more sense to take out a new loan altogether. FHA charges an assumption fee of $500 and a credit report fee. VA loans charge a $255 processing fee , a $45 funding fee and the VA itself receives a funding fee of 0.5% to 1% of the loan balance.

Cash for Difference Between Loan Balance and Sale Price

Borrowers who benefit the most from assumable mortgages are those that have the cash to pay the difference between the seller’s loan balance and the agreed upon sales price. For example, you are, purchasing a $200,000 home and have 10% to put down as a down payment. The seller’s assumable mortgage balance is only $40,000, which will require to obtain a second mortgage or other type of financing for roughly $140,000. Because second mortgage rates are almost always higher than those of first mortgages, it would probably make much more sense to take out a new 80-10 piggyback loan.

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The Risks of Getting 100% Financing

It’s great to be able to get your dream home for no money out of your pocket, but you need to consider the risks below when deciding if doing so is a smart move for you.

No Equity
Since you will be borrowing all of what your home is worth, you will leave yourself with no equity. Because of this fact, it will be more difficult to sell your home if you decide to do so. You will also not have many refinancing options available for several few years. This lack of equity virtually guarantees that you will be saddled with your current mortgage for many years.

High Interest Rates
With 100% financing, you will almost always garner higher interest rates than on mortgage loans with considerable down payment. Higher rates, and therefore higher payments, mean that you will be taking on a greater, monthly financial burden.

Mandatory Escrow and PMI
By exceeding 80% financing, most conventional lenders will force you to create an escrow account to cover your annual real estate taxes and homeowner’s insurance. You will also be required to pay private mortgage insurance (PMI), which is an insurance policy to compensate the bank for their heightened risk on high loan-to-value mortgages. These mandatory monthly additions to your mortgage payment can increase your monthly bill by several hundred dollars, causing you extreme financial distress.

Remember that 100% financing is a great option for those with little upfront cash who want to buy a home. However, these mortgages can also limit your financial flexibility greatly. Before entering into one, you must carefully consider the risks mentioned here. Once you sign the papers, you will be committing yourself to a long term financial responsibility, especially nowadays as property appreciation has begun to slow nationwide.

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Obtaining the Best Mortgage Refinance Rates

Fixed rate or Adjustable? How should I refinance? Should I wait a bit to improve my credit score or refinance right away? These and more questions are what a consumer usually thinks about when considering refinancing his or her mortgage. Fact is that it doesn't have to be too complicated all you really need to know is how much you can pay per month and find the best lender.

Fixed or Adjustable what is better?
Depending on the period you would like your refinance repayment choose the type of rate. In general Adjustable Rates are better for short term and fixed rates are better for longer periods. If you can afford paying more money per month and want to pay your mortgage over a shorter period of time work with ARM. If you don't care about the duration of the repayment but do not want to pay a lot per month, refinancing to a fixed rate mortgage will be ideal for you. A FRM tends to be more expensive but much more flexible than an Adjustable Rate Mortgage.

Improve Credit Ratings before Refinancing Your Home Loan
Here is a tip! When borrowing money from a financial institution or lender where a credit check is necessary rule of the thumb is: The higher your credit score is the better interest rates you will be quoted. Always belong to the prime market. Being labeled as bad credit doesn't only sound bad, but, will be problematic when applying for a loan. Therefore, before refinancing pay your bills on time. After a few months your credit ratings will climb and you will find yourself belonging to the prime market.

Compare Online Lenders, Quotes and Options
The internet is a great place to find information, do research and find cost efficient offers. By comparing several online lenders you will immediately get a better picture of the market. This will help you reduce the chances of getting scammed and of course help you get the best mortgage refinance rate. Find online home mortgage lenders and don't forget to do research before applying for a loan.

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Poor Credit with High ARM Payments - Refinancing to a FRM

Perhaps one of the known issues with ARM is the uncertainty it carries. If the prime rate lowers then - Great! However, when the rate climbs you might wish you have obtained a fixed rate mortgage. By refinancing your mortgage to a FRM you can make that wish come true.

Refinancing May Help Reduce Debt
If you have realized that one of the main factors that worsen your debt status is your mortgage monthly payments, you might want to think to refinance a mortgage with bad credit to lower payments or lengthen the loans term. If you've obtained an Adjustable Rate Mortgage and find that payments are not stable thus making it difficult for you to calculate and plan your month a long term fixed rate mortgage is a good solution. Not only will it reduce stress but it will help improve your credit score, by making all the monthly payments on time.

Negotiating the Payments
Due to your bad credit ratings most lenders or financial institutions will quote you high rates by default. There are however, some steps you can take to lower the rates. Remember that the higher down payment that you pay, the more chances you have for a lower fixed rate mortgage. By paying a larger down payment you will have an extra negotiating tool for your closing costs. It requires consistency, but, you may manage to have your closing costs waived or lowered to a very reasonable sum.

Mortgage Lenders: Comparing and Consulting
By filling out applications and comparing quotes from different lenders you will find that you will be offered fairly competitive mortgage refinance quotes. The market is very competitive thus making lenders want your account. You may even find it useful consulting with them on what's best to do. Remember to get a few price offers so you know exactly what you are headed towards. Make sure to get mortgage refinance information before refinancing your mortgage.

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Refinancing A Manufactured Home - What You Really Need To Know

It is a common misconception that refinancing is only applicable to homes that are not a mobile home or manufactured home. The truth is even these types of homes are available for loan refinancing. If you are wanting to consolidate debt, would like to have a better mortgage interest rate or a more feasible loan terms, or perhaps need some money for a car or college tuition – refinancing your manufactured or mobile home may be a preferred option for you.

A manufactured home refinance is structured by you paying off your current loan and simply taking out a new loan with more favorable terms. Favorable could mean anything from a better interest rate which results in lower monthly payments or a shorter term of repayment.

It does not matter whether your mobile home is located on your own private land or if you are renting space in a mobile home park or community. Refinancing can be based upon the inclusion of land in the appraisal value or the exclusion of the same. You will need to check with your lender in the state of your residency to find out what the laws and regulations are that govern the refinancing of your mobile home.

When you refinance you will have to pay closing costs just as when you first purchased your home. Often a lender will allow you to roll the closing costs into mortgage to avoid paying them out of pocket. Keep in mind that when you roll over the closing costs into the mortgage you will be interest on those closing costs which means that in the end you will be paying more than if you just paid them up front in cash.

As with refinancing of traditional homes, you will be able to pay a fee upfront to your lender to purchase points to bring down your interest rate. Typically, one point equals a one percent reduction of the loan interest rate. So if you have a loan for $50,000 at an 8.5% interest rate and you wanted to buy points, one point would reduce your interest rate to 7.5%. If you are considering purchasing points, you need to make sure you will own the property long enough to retrieve the money you spent to purchase the interest buy-down points.

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Refinance Your Mortgage and Build Your Credit Rating

Everywhere you look, lenders are judging you based on the digits in your credit score. In the recent past, your credit rating wasn't all that important. But these days, when lenders are offering more and more options for borrowing money cheaply, they're taking a long, hard look at credit histories. Building your credit rating is perhaps the single most effective strategy to make yourself more credit-worthy. And if you currently have a mortgage, you already have one of the best tools for tuning up your credit rating.

Lenders look for stable, consistent repayment of obligations over time. The more you can show an ability to pay bills on time, the more points you gain. But if you really want to score high in a lender's eyes, pay down your bills and increase the equity in your home at the same time.

If you're making regular mortgage payments, you may want to look at your options for refinancing to a better rate. If you can lower your interest rate significantly, it will enable you to apply the extra funds toward the principal balance on your mortgage. As the principal drops, your equity rises. Continue to make payments on time, and your credit rating will soon be at the top of its game.

Refinancing for debt consolidation

Another way to build your credit rating is to shop for a lower mortgage rate, refinance, and lower your monthly payments without trying to pay off the principal. Use the extra money to pay off other bills, like credit cards. Or open a money market account and demonstrate that you're disciplined about saving for the future.
No matter how you play your hand, refinancing to a less expensive interest rate can be a trump card when it comes to enhancing your all-important credit rating. Once you show a steadily improving credit score, lenders will court you for your business. In a few years, you can take them up on their offers, and refinance again, to further reduce your debt while increasing your rating even more. Start here to compare refinance rates from top lenders in our network.

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Mortgage Refinance to Reduce the Term

If you have a conventional fixed rate 30-year mortgage, you're alongside the majority. Most people who buy homes-especially those who purchase their first one-opt for the longest payout schedule possible, in order to take advantage of lower monthly payments. But shorter loans should not be overlooked, because they can represent huge savings over the life of a mortgage.
Compare Refinance Rates

The bulk of the money spent for your monthly mortgage payment is dedicated to paying interest. A house that sells for $200,000 today may wind up costing more than twice that price, once all the interest payments are calculated during the course of three decades. By shortening the life of the loan, the savings can be dramatically increased-often by hundreds of thousands of dollars. Once you do the math, it's easy to see why shortening the term and reducing interest payments is the most popular reason why people refinance.
Organize Your Finances

Another compelling reason to do a mortgage refinance and change your mortgage loan's term is to organize your financial plans. If you're 50 years old and plan to retire at age 65, paying off your mortgage in 15 years may be a rewarding strategy, both financially and personally. When retirement arrives, you'll have no more mortgage payments to make, and you can enjoy a smoother and happier transition into your golden years.

Many parents, who have children headed for college in 10 to 15 years, will often do a home refinancing to shorten their term and pay off the mortgage before the tuition bills begin to arrive in the mail. This way, they no longer need to worry about making payments of tuition and mortgage at the same time, which can offer them welcome relief. In many cases, they can save enough to offset the cost of a child's education by not paying an extra 15 years of mortgage interest. That's a double-barreled bargain worth looking into, especially with interest rates near their all-time lows, but threatening to reach double digits within the next few years.

* Costs of Refinancing
Start here to compare refinance rates from top lenders in our network.

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