House Refinance Center
Q & A On Mortgages
| Q: My house is worth about $200,000 and I owe the bank $250,000. Can I still get a mortgage at good rates? A: You can still get a mortgage but you can't expect to get the premium rates. The best rates are reserved for those with good credit and equity in the house. Q: What is the annual percentage rate (APR)? A: The Annual Percentage Rate is the interest rate charge to a borrower taking inti consideration all the extra fees and costs associated with the loan. For example, legal fees are considered, appraisal fees, home inspection fees, these are all factored into the calculation. Q: Can I find the total lender fees in the Truth In Lending Act (TILA) document? A: Yes. TILA requires the lender to provide the borrower with correct, complete and sufficient disclosure of costs and fees on all mortgage loans and credit card borrowing. Q: What are the real estate settlement fees and costs that I have to pay on closing? A: There are several costs you have to pay on closing. The important ones are appraisal, home inspection, title search and title insurance, recording fee, points, loan origination fee, application fee and the attorney fees. Q: I declared bankruptcy 3 years ago. Houses are cheap now. Can I buy a house? A: Yes. However you will need a sizable downpayment. A lender will consider the deal if you have 25% or more as a downpayment. If a traditional lender considers the deal too risky, you might have to turn to a hard money lender. In this case you can expect to pay 4% or higher than the traditional lender's rate. Q: A consultant promised to help me get my mortgage modified. He want a retainer of $1,500. Do I have to give it to him? A: No. If someone wants money upfront say no and walk away. Many of these so called consultants just want to make a quick buck. They will do nothing for you. Q: I am not happy with the appraisal report. This is the bank's guy. Can I get my own appraiser to redo the report? A: Yes, but first you must voice your displeasure to the bank. You then get a different appraiser, one that the bank authorizes. Now remember that you have to pay for this out-of-pocket. If the number are close, the bank will average the figure, to arrive at a market value for the house. If the two appraisal report are far apart the lender might suspect some foul play and walk away from the deal. So you have to be careful. Q: Are prepayment penalties tax deductible? A: No. The interest on the mortgage is deductible but not the penalty. We can't expect the taxpayers of America to subsidize our bad decisions. |
| REVERSE MORTGAGES Q: I am thinking of a reverse mortgage. What are the HECM lending limits? A: It depends on where you live. The HECM limits are tied to your area. You take the limit, whatever that is, and then compare it with the appraised value of the house. The lower figure is what you would use. Q: Are HECM loans the only loans for people over 62 years old? A: There are several types of loans available for people over 62 years of age. You can get a personal loan. There is also the Home Equity Line of Credit (HELOC) that you should consider. And there is Fannie Mae's Home Keeper loan. The Home Keeper has higher loan limits than a HECM. So if you Home Keeper. Q: How is the Home Equity Conversion Mortgage Program (HECM) different from other reverse mortgage programs? A: The HECM is insured by the federal government, through the Federal Housing Administration (FHA). The HECM is cheaper than most other reverse mortgages. Only state and local government entities might offer cheaper reverse mortgages. And these reverse mortgages are for specific programs. The HECM is very flexible in terms of payout. You can get a lump sum, or a tenure plan. And you can use the money for whatever purpose you want. Q: My credit is kind of blemished. Can I still get a HECM? A: Yes. A HECM is based on the equity you have in the house and also on your age. These are the two key factors. Q: Is it possible to have a reverse mortgage foreclosure? A: No. Since you are not making any mortgage payments you can't be delinquent. However, if you are required to pay the property taxes and the fire insurance, and these are neglected, that could be an issue. The city or county can put a lien on the house for non-payment of taxes. Your lender will not be happy. Q: I hear that fees are a big issue with reverse mortgages. How big are the costs? A: The costs can range from $3,000 to $6,000. The maximum is 2% of the house value for the Home Keeper. For a HECM the maximum cost is 2% of the claim amount. |
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| Second Mortgages Q: Can I refinance before the second lien holder is paid? A: Your chances of this happening are not good. costs. And chances are that the property is run down. The second mortgage holder will accept almost anything just is get out of the way, and leave it to you and the first to duke it out. Q: Why is a silent second mortgage dangerous for lenders? A: A silent second is a borderline scam and a fraud. The first lender provides 80% financing, the buyer 5% and the second 15%. At closing first thinks that the buyer has 20% equity in the property. This is not the case. The first is now exposed to a greater risk because there is no Private Mortgage Insurance (PMI). The government use a silent second in its Good Neighbor Next Door program. This is effective and all the cards are on the table. Q: What is a no equity second mortgage? A: A no equity second mortgage allows you to borrow more than the house is worth. Generally you can borrow up to 125% of the value of the house. It is a dangerous strategy in a declining housing market such as we currently have. You can't sell because you will get less than the two mortgages. You will have to liquidate other assets to make the deal work. Q: Can I refinance a second mortgage? A: Yes. However you should do your homework. Make sure the refinancing makes economic sense and that there will be benefit to you. Q: What happens with the second mortgage when there is a foreclosure? A: The first mortgage gets paid first. Plus all the fees and costs to the first are paid out of the proceeds. If anything is left over then that goes to the second mortgage holder. Generally, because foreclosure is expensive, the second mortgage holder seldom recovers everything. He takes a hit. Q: What happens when the second mortgage lenders starts the foreclosure process? A: The holder of the second mortgage seldoms starts the foreclosure unless there is enough equity in the house. |
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