Adjustable Rate Mortgages vs. Fixed Rate Mortgages: Which One is Better For You?

mortgage modification attorneysHome ownership is still the American dream. Today, obtaining a mortgage to purchase a home has gotten to be a lot more difficult. Questions arise as to which type of mortgage is the better route for a prospective homeowner to take. The adjustable rate mortgage or the fixed rate mortgage?

Adjustable rate mortgages are riskier than fixed rate mortgages. An adjustable rate mortgage allows you to go into the mortgage with a lower interest rate for a period of time. The risk is that the interest rate, over time, will go up and become unaffordable. The most common type of adjustable rate mortgage has a fixed interest rate for the first 5 years. However, every year after the first five years, the rate changes on an annual basis. The interest rate is governed by the Federal Reserve Boards “Consumer Handbook on Adjustable Rate Mortgages.” When obtaining an adjustable rate mortgage, the prospective homeowner takes the risk as to whether interest rates will increase over time. If this happens, the monthly mortgage payments may increase to a level that the homeowner will become unable to make the monthly mortgage payments.

Adjustable Rate Mortgages Start With Lower Payments

The adjustable rate mortgage gives the homeowner a lower interest rate in the beginning which allows the homeowner to have additional funds to pay off debt and to accumulate some savings as a cushion. There are caps which are utilized by financial institutions regarding adjustable rate mortgages. These caps usually allow the mortgage to go up no more than 2% per year and 5% over the entire period of the loan.

When Do Adjustable Rate Mortgages Make Sense?

An adjustable rate mortgage makes sense if you are planning on holding your home only for a short period of time. If you are planning on holding your home 5 years or less, the adjustable rate mortgage would be a better deal. If you plan on holding your home for a longer period of time, the fixed rate mortgage is most likely the more conservative way to go and involves a lot less risk. Unfortunately, many homeowners presume they are going to move, relocate, sell and buy, within the five year period and then their plans change. At that point they are stuck with an adjustable rate mortgage unless they refinance all over again.

Fixed Rate Mortgages

A fixed rate mortgage is a mortgage that has a payment that remains the same over the entire period of the loan. These mortgages are usually for terms of either 15 or 30 years. Approximately 75 to 80% of the homeowners who take out mortgages, take fixed rate mortgages on their homes. It gives the homeowners the security of knowing what their mortgages rates will be over long periods of time. It allows them to make plans for the future and gives them the security of not facing higher mortgage payments down the road. Families who have fixed rate mortgages are usually looking to avoid the long term risks of losing their homes in foreclosure proceedings.

homeowner advocates on long islandElliot Schlissel is a foreclosure defense attorney representing homeowners throughout the Metropolitan New York area.

Documents Used to Obtain a Mortgage

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Elliot S. Schlissel is a foreclosure defense lawyer.  He can be reached at 516-561-6645, 718-350-2802 or by email to schlissel.law@att.net.

Home Flipping in Nassau County, New York

foreclosure assistance for homeownersSpeculators have been involved in a significant amount of home flipping in Nassau County. A home is considered to have been flipped when it is purchased and then resold within a period of 180 days. There were approximately 200 homes flipped in Nassau County during the six month period ending in April 2014. The average purchase price of the homes that were flipped was $316,000 and the sale price of the homes within that same six month period was an average of $423,000. This provided a profit of over 33% to the speculators doing the flipping.

Why Are Homes Being Flipped in Nassau County, New York?

The reason for homes being flipped in Nassau County has to do with the fact that home prices are going up and there has been an increase in new foreclosure lawsuits. During the first quarter of 2014, there was a 4% rise in the number of foreclosure cases initiated by financial institutions in the courts in Nassau County. There has been a 6% year to year increase in the value of homes in Nassau County.

Pursuant to RealtyTrac approximately 2% of all the homes purchased in Nassau County have been purchased by speculators and flipped.

Conclusion

Speculators are very attuned to market trends. The fact that speculators have gone back into the marketplace in Nassau County to purchase homes indicates they believe real estate is appreciating at a significant level in Nassau County. Does this make it the right time for prospective purchasers to purchase a house in Nassau County? Yes, I believe purchasing a home in Nassau County is an excellent investment at this time.

helping homeowners stay in their homesElliot S. Schlissel is a foreclosure attorney. He has been defending homeowners in foreclosure lawsuits for more than 45 years. Elliot and his staff of attorneys are well known in the court system and have had an excellent success rate in helping their clients obtain mortgage modifications. Elliot and his staff of attorneys are available for free consultations to homeowners having financial difficulties.

Owning a Home is Better Than Renting

mortgage modification attorneysThere are a number of factors that should be taken into consideration when comparing the benefits and problems of home ownership versus renting.

No Mortgage vs. No Landlord

When you own a home you are in charge. It is yours! It belongs to you. If something breaks, you fix it. When you rent, you are living in the landlord’s house. If something breaks you need to contact the landlord to fix it. Landlords are not always very responsive to helping their tenants deal with problems in their apartments.

Fixed Rate Mortgages Don’t Go Up: Rent Does!

If you buy a house and obtain a fixed rate mortgage, you will pay the same amount each and every year. If you rent an apartment, periodically the landlord will raise your rent. It should be noted although your mortgage rate won’t go up, taxes on real property go up over time.

Homeowners Obtain Tax Deductions for Mortgage Interest

There are significant tax benefits for owning a home. You can deduct, in your federal and state income taxes, the interest paid on your mortgage. In addition, there are a variety of energy efficient improvements to the home that can be made which are also tax deductible. When you sell your home, the first $250,000 in profit payable to the owner of the home is not subject to capital gains tax.

Managing Your Own Space

When you are in an apartment there are small cosmetic things you can do. However, you cannot customize the space to meet all your needs. If you own a home, you can move walls and do anything you want with it. The space can be modified to meet all of your personal needs and/or whims.

Homeowners Can’t Be Evicted

If you rent an apartment and you don’t pay rent, thirty days afterwards a landlord can bring a summary proceeding and have you removed from the apartment. Eviction proceedings are relatively quick proceedings (although in the City of New York they can take as much as six to eight months). However, if you don’t pay your mortgage, and a financial institution has to bring a foreclosure lawsuit, those proceedings can take as long as three to five years. During that period, you can be living in your home while not making mortgage payments.

assisting homeownersElliot S. Schlissel is a foreclosure lawyer. He represents clients whose homes are going into foreclosure. He helps them stay in their homes, obtain mortgage modifications, and litigate a variety of issues involved regarding foreclosures with financial institutions. Elliot can be reached for a free consultation at 1-800-344-6431, 516-561-6645, and 718-350-2802.

FHA Gives Homeowners a Second Chance to Buy a Home

foreclosure defense for homeownersThe Federal Housing Authority (FHA) has a new program which will stay in effect until September 30, 2016. This program offers homeowners who have lost their homes due to short sales, whose homes have been sold in foreclosure, or who have given deeds in lieu of foreclosure back to financial institutions, a second opportunity to purchase a home. In the past, if a consumer lost their home related to a foreclosure case, they would have to wait thirty-six months before they could apply for a new FHA loan. However, under this new program, they would only have to wait twelve months after a foreclosure sale or a short sale to apply for a new FHA loan as long as they can document the financial issues that caused them to lose their prior home.

Reduction in Income

If the prospective homeowner can show that they had a loss of income of twenty percent or more for a minimum of six months prior to the loss of their home, it will help them qualify under this new program.

Credit Score

Under the new FHA program, the homeowner will need a credit score with a minimum of 640. In the event the prospective homeowner could not meet this credit score requirement, they must go through a HUD approved counseling agency concerning the issue of home ownership and residential mortgage loans.

The homeowner should be aware that supporting documentation with regard to any financial issues, hardships, illness, loss of employment or other problems that caused the individuals to lose their initial home must be fully documented. A letter explaining the situation will not be sufficient to qualify for this new FHA program.

Conclusion

FHA is extending themselves to homeowners and giving them a second chance that has never previously been offered to families who have lost their homes.

helping homeowners stay in their homesElliot S. Schlissel is a foreclosure defense lawyer. Elliot and his staff of attorneys represent individuals and families throughout the Metropolitan New York area whose homes have been foreclosed upon by financial institutions and mortgage companies. Elliot assists his clients in mortgage modifications. In addition, Elliot brings lawsuits against financial institutions who have broken laws, failed to obtain proper assignments and who do not have standing to bring their foreclosure lawsuits. Elliot has an unparalleled record of success in keeping his clients in their homes after foreclosure proceedings have been initiated against them.

Mortgage Lenders: Are There Differences Between Them?

foreclosure defense lawyerThe first thing most prospective homeowners think about with regard to a mortgage is, what will be the interest rate? Obviously, the lower the interest rate, the less the mortgage will cost the consumer. However, there are other important issues to think about when applying for a mortgage.

What Type of Institution is Best For You to Deal With

Large national banks in some areas of the country dominate the mortgage marketplace. Examples of these types of banks are, JP Morgan Chase, Citibank, and Bank of America. Large financial institutions set their own guidelines with regard to underwriting requirements for mortgage loans. Most large financial institutions do not pay commissions to third party mortgage brokers. This brings the cost of obtaining a mortgage from a large financial institution down. These banks will, if you take a mortgage out from them, provide you with incentives such as paying you higher rates of interest on savings and checking accounts. If you deal directly with a large banking institution, you should try to develop a rapport with the individual at the bank handling your transaction. This will be helpful to you should there develop problems in the underwriting process.

Online Financial Institutions

The internet provides its own marketplace for financial institutions to advertise regarding mortgage loans. Online financial institutions are better suited to refinancing mortgage loans than initiating mortgage loans on the purchase of a home. Sometimes problems arise when dealing with online lenders because they are not located in the community and may not be familiar with the problems in the local real estate market. There is a benefit from dealing with a financial institution on a face to face basis.

Do You Need a Mortgage Broker?

Mortgage brokers are not technically working for a financial institution. They are middlemen who usually work on a commission basis. They may have contacts with a number of lending institutions. They can be helpful to you with regard to properly filling out the necessary forms required in a mortgage application. They also may be in a position to shop around for the best deal you qualify for. In special situations where you have a problem related to your property or your property is of a unique nature they may be able to find a financial institution to specifically fit your needs. They can also run interference for you with the financial institution and eliminate some of the busy work you may need to do with a direct lender. You should take into consideration however, since they are a middleman, and they will be working for commission, they may bring up the cost of the acquisition of your mortgage.

Conclusion

The purchase of a single family home is usually the largest transaction an individual or family will be involved in. Care should be taken when applying for a mortgage to see that the type of institution and deal you are offered is the most appropriate one for your particular circumstances.

assisting homeownersElliot S. Schlissel is a foreclosure defense lawyer. Elliot has published several hundred articles with regard to foreclosures, mortgage modifications, and other real estate issues. Elliot and his staff of attorneys represent homeowners having financial difficulties and who face foreclosure lawsuits in the Metropolitan New York area. Elliot and his attorneys have developed an expertise in dealing with financial institutions, helping their clients obtain mortgage modifications, and stopping financial institutions from successfully foreclosing on their homes when they fall behind on their mortgage payments. He offers free consultations to prospective clients.

The Facts About Home Loans in Today’s Home Mortgage Market

Obtaining a mortgage is becoming a bit easier. Credit scores required by financial institutions to qualify for a mortgage loan have been coming down. The average credit score for loans that have recently closed is down to approximately 730. This is on a scale which ranges between 300 and 850. Only a year ago, you would have needed a credit score of a minimum of 750 to qualify for a mortgage to purchase a home. You should note, that although the average credit score is approximately 730 on home loans which have recently closed, there are some financial institutions that are now offering mortgages to individuals with credit scores as low as 700. This allows more potential homeowners to have the opportunity of purchasing the American dream, a single family home.

What Are Loan to Value Ratios?

When a bank underwrites a mortgage loan application, one of the significant items they look into is called the loan to value ratio. The loan to value ratio compares the appraised value of your home to the amount of money you seek to borrow. An example of loan to value ratio is, let’s say you wanted to purchase a home that cost $400,000. If you had enough money for a 20% down payment, which would be $80,000, the loan to value ratio you would be looking for would be 80%. This simply means you wanted to obtain a mortgage of 80% of the value of the home.

Debt to Income Ratios

When banks underwrite a mortgage loan, they look into how much money you are earning. In today’s mortgage market, they only count the funds that appear on your income taxes. Money made off the books, which doesn’t appear on a tax return, will not be considered by a financial institution when underwriting a mortgage. The debt to income ratio is sometimes referred to as “DTI”. There are actually two components of the debt to income ratio. The first component is called the “front end” debt to income ratio. This represents the percentage of your total monthly income you will have to utilize to make your mortgage payment. The second debt to income ratio is referred to as the “back end DTI”. The represents the percentage of your total gross monthly income you will pay towards your mortgage plus all other debt obligations. This would include car payments, personal loans, money owed to American Express, Mastercard, Visa, gas station credit cards, store credit cards, and all other financial obligations.

Let’s look at an example of debt to income ratios. Let’s assume your total family income is $8,000 per month. For this example, let’s use a mortgage payment of $2,000 per month and other financial obligations of an additional $2,000 per month. In this example your front end debt to income ratio would be 25% and your back end debt to income ratio would be 50%. Banks are currently using front end debt to earnings ratios of 25% and back end debt to earnings ratios of approximately 38%. These are more liberal percentages than banks were using approximately a year ago.

Conclusion

Although the easy money days regarding mortgage financing are gone, banks are now being more reasonable with prospective homeowners with regard to loosening their standards to obtain mortgages.

helping homeowners stay in their homesElliot Schlissel is a foreclosure attorney. For more than 45 years, Elliot and his associate attorneys have been litigating all types of real estate and foreclosure cases. Elliot’s goal is to help his clients stay in their homes and fight off foreclosure lawsuits brought by financial institutions. He also assists his clients in obtaining mortgage modifications on their homes.

Qualifying for a Mortgage

foreclosure defense attorneysThe purchase of a single family home is usually the largest single purchase made by Americans during the course of their lifetime. Before you can purchase a home, it is strongly suggested you look into your ability to qualify for a mortgage to help you pay for the home. There are a number of significant factors taken into consideration by financial institutions when underwriting a mortgage.

Are You Employed?

The underwriters of mortgages at financial institutions are interested in your employment history. They are especially interested in if you are currently employed. If you are self employed, the underwriters may want detailed information about the capacity in which you are self employed. If you are working for a company or business, they are going to ask you questions as to how long you have worked in this position for, and what were your prior positions. It is especially important that you maintain good records concerning your past three years tax returns, bank statements concerning your checking and savings accounts, pay stubs and other material necessary to verify your employment history.

The Down Payment

If you are looking to obtain a conventional mortgage, most banks will loan you up to 80% of the cost of the house. This means you will have to come up with 20% of the funds on your own. In cases where you have a problematic credit history, you may need to put down more than 20% of the cost of the house as a down payment.

Closing Costs

There are numerous closing costs related to buying a home in New York. There are bank fees. There are underwriting fees. There are points payable to the bank. There are attorneys’ fees for your attorney and the attorney for the financial institution. There is the prepayment of taxes on the house. There is the payment of casualty insurance on the house. You will have to reimburse the seller for all of the oil in the oil tank. In addition, there are numerous other types of closing costs. It is estimated that closing costs in New York will run anywhere from $5,000 to $15,000 to purchase a home. You should carefully look into the closing costs with the attorney representing you on the real estate transaction.

Credit Scores

The financial institution will order credit reports for those individuals whose names will appear on the mortgage of the home. You should obtain a copy of your credit report in advance. In the event there is inaccurate information on your credit report, you should immediately take action to correct this. In the event your credit score is not high enough to meet your bank’s requirements to obtain a mortgage, there are a variety of things you can do to boost your credit score prior to submitting a mortgage application.

The Mortgage Loan Application Process

The process of obtaining a mortgage loan can be aggravating for the prospective homeowners. Financial institutions currently are asking for significant amounts of information from a prospective homeowner to determine whether you are a good risk and that you have the ability to repay your mortgage loan. Hopefully this article will open your eyes as to the various areas you should look in before contacting a financial institution and starting the process of trying to obtain a mortgage.

helping homeowners stay in their homesElliot Schlissel has been representing clients in real estate related matters for more than 45 years. Elliot and his staff of attorneys represent homeowners who are buying and selling homes. In addition, Elliot and his staff of attorneys provide foreclosure legal defense for their clients.

Hidden Expenses When Buying A Home – Part II

foreclosure defense attorneyRenovations to the Home

It is usually necessary for new homeowners to do small to moderate renovations to their new home. Things such as painting, changing fixtures, modifying kitchens and bathrooms, can amount to tens of thousands of dollars very quickly. It usually costs homeowners anywhere from 1 to 2% of the purchase price of a home to do minor modifications or renovations to the home to make it more livable and/or suitable for their life.

New Appliances

So you have just bought your new home. When you look at your kitchen, do you really want all of the old appliances? If you are going to buy new appliances, this is the right time. However, appliances are not inexpensive. Purchasing new appliances or upgrading old appliances can run into thousands of dollars.

Termite Inspections

If your home is made of wood, you need to have a termite inspection. Termites have been around since the beginning of time. In many areas of the country, forests were originally cut down to make room for the development of communities. When they cut the forests down, the termites didn’t leave. They went into the ground and they feasted on the new homes that were built.

A large portion of the homes in the northeast of the United States during the course of their lifetime will be subject to termite infestation. Before purchasing a new home it is important you have a termite inspection to make sure your home is termite free. If termite damage exists, the termite damage should be repaired before you close on the purchase of your home. In addition to termites, there are other wood destroying insects that you need to be concerned with. Carpenter ants also can cause significant damage to homes. The cost of termite inspections and/or repairing the damage done by termites can be an unforeseen expense when purchasing a new home.

Escrow for Taxes and Insurance

When you close on a home, the bank will usually require you deposit a certain amount of money in escrow related to your annual tax and insurance payments. Banks require 1/12 payments each month to be made by the homeowner related to the hazard insurance costs on their property and the real estate and school taxes that are due on their property. At the time of closing, banks normally pick up at least one month’s taxes in advance and the balance of the month from the date of closing until the first date of the next month.

homeowner advocatesElliot Schlissel and his associates are foreclosure defense lawyers. They litigate foreclosure lawsuits on behalf of homeowners and help them obtain mortgage modifications. Elliot and his associates have been helping homeowners keep their homes for more than 45 years.

Home Buyers Misconceptions

foreclosure defense lawyerBuying a home is a complicated undertaking. First home buyers usually rely on discussions with friends and relatives as to what action they should take, what they should do, what they should be aware of, and how real estate transactions are conducted. The lay of the land on home purchases has changed. The mortgage bubble that resulted in the real estate crisis in America has changed some of the ground rules.

Real Estate Brokers Are Not Always Necessary

Real estate brokers provide a valued service to both buyers and sellers. They are very well paid for their services. However, homeowners can sell their homes without a real estate broker. This is especially true if someone is available to show the home during evenings and weekends. A homeowner can advertise the home for sale in local newspapers and/or on the internet, meet and greet the prospective purchasers, and hire an attorney to represent them on the real estate transaction. If the homeowner does not have the time, the patience, or the availability, hiring a real estate broker to represent them may be a necessity. Websites such as www.zillow.com and www.redfin.com can be utilized by a homeowner who seeks to avoid paying the commissions related to listing a home with a real estate broker. Many home buyers today utilize the internet to look at the material on these websites to find the home of their dreams.

Hidden Costs of Owning a Home

The average homeowner, when looking to purchase a home, takes into consideration the mortgage and sometime the taxes on the property. In addition to the mortgage and taxes, homes require heat in the winter and they may require air conditioning in the summer. The fuel oil to heat the home and the electricity to air condition the home can be expensive. Depending on the climate of the area where the home is located, these expenses can amount to between $5,000 and $10,000 per year. Even if the home does not need air conditioning, the electricity to run the appliances, computers, and keep the lights on can be very expensive. The grounds of the home need to be maintained. The homeowner has to maintain his lawn and shrubs and the rest of his property or hire a gardener to do so. The exterior of the home needs to be kept in good condition. Painting needs to be done on a periodic basis and/or the home needs to be sided. Roofs can leak, boilers can break, pipes can leak, electrical issues can develop. These are all potential expenses a homeowner may face.

Down Payment Policies

A 20% down payment is not always needed to obtain a mortgage. If the prospective homeowner is looking to obtain a conventional mortgage from a financial institution, a 20% down payment may be necessary. However, under Federal Housing Authority (FHA) programs, much less is required as a down payment. In some situations, as little as 5% or 10% of the cost of the home is sufficient as a down payment. Programs are available from the Veterans Administration for veterans who can finance a home with a very low down payment.

foreclosure advocate for homeownersElliot S. Schlissel, Esq. has been representing clients in real estate transactions for more than 45 years. His office represents homeowners in buying and selling of homes, defending them against foreclosures, and helping them obtain mortgage modifications when they fall behind on their mortgages.

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