Each of them has its own advantages and drawbacks, and surely there’s a risk to take when we decide for one type or mortgage or another.

Fixed rate mortgages are good if the rates have a growing trend: why not make a deal at the current rates, and pay less than some other people who make their deals in a year from now? The advantage is that you pretty much know all the variables: you know what your average income is, and you know how much the mortgage will cost you per year, so you can make some long term calculations and budgeting.

Variable rate mortgages can be good if the market becomes more and more crowded, thus more competitive, and all major players decrease the rates, in order to attract new clients. Then you won’t be happy to pay a fixed rate, when you see the rates dropping every year.

Anyway, before you decide, you’d better do your homework right and compare as many options as you can, to see what’s best for you. This can be done online, on websites like MoneyMagic, where you can apply online to get your free mortgage quotes.

If you need free advice on UK Commercial Mortgages, you can find it on Money Magic, where you can find out everything you want to know about types of mortgages or mortgage guides, and where you can apply for free commercial financing advice. Their specialists will work for you, in order to deliver you the best advice, and to find for your the loans with lowest interest possible in your situation.

If you don’t like to write, you can call them (there is a phone number provided on the website) and get your free quotes with no obligation for you.

If you want to play around with the figures by yourself, you can use the free mortgage calculator and have fun while you also get familiar with the kind of money you may qualify to get.

Mortgage After Bankruptcy: These Steps Could Help

Tip! Get a referral. If you know someone who has filed bankruptcy, don’t be afraid to ask them whether they felt their lawyer handled their case well.

If you want to increase your chances of qualifying for a mortgage after bankruptcy, here are some steps you can take:

First, if you plan to apply for a mortgage after bankruptcy, you will want to have any inaccurate or obsolete negative information on your credit reports corrected or removed. This can help increase your credit score.

Also, you will want to establish some new accounts, and pay them in a timely manner over time. If you’ve paid the accounts on time for about 18-24 months since your bankruptcy, this should help rebuild your credit – which can be a plus when applying for a mortgage after bankruptcy.

Next, you will want to work with an experienced mortgage broker. Why? Because buying a home is probably going to be one of the biggest investments you’ll make. You will want to have an experienced professional guiding you through the lending process – especially when it comes to applying for a mortgage after bankruptcy.

A mortgage broker typically has access to dozens of lenders and will probably have a good idea of which ones will (and will not) approve you for a mortgage after bankruptcy. In addition, they will be able to tell you what to expect in terms of the financing process.

Tip! Have derogatory credit items removed from your credit report. For the items charged off in your bankruptcy, you will need to send a copy (not the original) of your bankruptcy discharge papers to all 3 of the credit bureaus asking them to remove these inaccuracies.

So how do you find a mortgage broker? One way is to to ask friends or real estate agents for a referral. Once you have a few names, set up an appointment to interview each mortgage broker.

Among other questions, you will want to know if they have successfully been able to get other individuals a mortgage after bankruptcy. You also want to make sure they are licensed.

Tip! Pay all of your bills on time. Bankruptcy is a means to financial recovery.

Another question you will want to ask is what type mortgage loan (A, B, C, or D) the mortgage broker thinks you can qualify for. Why? The lower the grade of the loan, the higher the interest rate. This is an important consideration when applying for a mortgage after bankruptcy.

In addition, there are other important questions you will want to ask a potential mortgage brokers – ones that could help you save money and/or increase your chances of qualifying for a mortgage after bankruptcy. While there isn’t enough room to cover them here, I go into detail on them in After Bankruptcy Credit Solutions.

Tip! Why doesn’t everyone just call bankruptcy when everything gets too hard. Put simply, your credit is ruined.

Also make a point to bring your financial information with you when you meet with a mortgage broker. For example, you should have your income and expenses available as this will help the broker determine the loan amount you may be able to qualify for when it comes to a mortgage after bankruptcy.

Generally speaking, most lenders will allow you to get a home loan with a payment of up to 28% of your gross income. So if you make $4,000 per month, that would be $1,120. But keep in mind that this just an example. Again, a good mortgage broker can explain the criteria that each lender has.

If you have copies of your credit reports from each of the major credit reporting agencies (Experian, Equifax, and Trans Union) this will help also. Your credit report will play a major role when it comes to qualifying for mortgage after bankruptcy.

On that note, if you want to increase your chances of qualifying for a mortgage after bankruptcy, make sure that any inaccurate or obsolete negative information is removed from your credit report. This is important for two reasons: (1) It can mean the difference between qualifying or not qualifying for a mortgage after bankruptcy, and (2) if you end up qualifying for mortgage after bankruptcy, any inaccurate or obsolete negative information on your credit report could cost you up to $1,000s or even $10,000s in additional interest.

Tip! Everyone will know I’ve filed for bankruptcy. Unless you’re a prominent person or a major corporation and the filing is picked up by the media, the chances are very good that the only people who will know about a filing are your creditors.

How do remove any inaccurate or negative information from your credit report, so you can improve your chances of qualifying for a mortgage after bankruptcy? There are specific steps you need to take. While I cover them in After Bankruptcy Credit Solutions, there is not enough room to go into detail here. Just remember that ideally you want rebuild your credit history before applying for a mortgage after bankruptcy.

By the way if you think that removing inaccurate or negative information from your credit reports takes a long time, I have good news. There is a way to have it removed in as little as 72 hours – the service is typically not available directly to consumers. In After Bankruptcy Credit Solutions I show you how to find this type service if you are trying to qualify for a mortgage after bankruptcy.

In this article we touched on two important steps you can take if you plan on applying for a mortgage after bankruptcy: Correcting or removing any inaccurate or obsolete negative information from your credit reports, and finding a mortgage broker to guide you through the lending process.

Tip! I’ll lose everything I have. This is the misconception that keeps people who really should file for bankruptcy from doing it, says Chris Viale, chief operating officer of Massachusetts-based Cambridge Credit Counselling Corp.

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Copyright © 2006 Innovative Solutions Publishing, Inc. All rights reserved.

The company and product/service names referenced in this article are the trademarks, registered trademarks or service marks of their respective owners. None of the owners have sponsored or endorsed this article.

DISCLAIMER:

This information is designed to provide only a general overview of the subject matter herein.

This information is provided with the understanding that neither the publisher nor author is engaged in rendering legal, accounting or other professional advice. If legal or other expert assistance is required, the services of a professional should be sought.

Neither the publisher nor author shall be liable for any loss or damages, including but not limited to special, consequential, incidental or other damages, caused by the information contained herein.

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About the Author: R. Lawrence Anderson is author of After Bankruptcy Credit Solutions, which shows individuals how to qualify for credit and loans after bankruptcy – including how to qualify for a mortgage after bankruptcy.

Because of the personal nature of loans and mortgages, an excellent and permanently updated direct marketing mailing list is a must for every respectable player in this market. Such a list would save the bank a lot of money and time, by avoiding undesirable returns of mailings and by allowing a direct contact with their customers and prospects.

The use of mortgage intelligence is beneficial for homeowners, who can choose from a broad range of loans, suitable for practically every need. But this knowledge does not come by itself, therefore it is very important that banks work with very accurate data, to avoid the GI-GO effect (“Garbage In – Grabage Out” is a marketing principle which emphasizes the importance of working with high quality data, for getting high quality results). Bad information in this domain leads to poor loans, thus decreasing credibility and leading to crisis.

The best solution for banks and mortgage companies is to hire specialists teams, like Red Clay Media, who offer full direct marketing services, from creative design, to consumer data and state-of-the-art marketing programs meant to optimize their clients’ results. Such teams would do the work efficiently, with less costs than a team of permament employees.

This is what specialists are for, isn’t it?

What some people don’t know, is that they can appeal to the FHA (Federal Housing Administration) to get a FHA loan for buying their desired house. The FHA also allows homeowners to obtain a FHA loan refinancing, thus making it possible to lower their interest rate and their monthly payments.

Advantages of taking a FHA mortgage:

• Usually, FHA mortgages do not require more than a 3-5 percent down payment. This amount does not need to be secured as the homebuyer’s own money.
• FHA mortgages have no mortgage value cap. It means that the only restriction when you get the money is the credit applicability.
• FHA closing costs can be financed into the total amount of the mortgage and paid off accordingly, so you won’t have to pay any additional amount at closure.

For the conditions to qualify for a FHA loan, or for other FHA mortgage questions, you are welcome to get in touch with the specialists from FHA Research Center, who will make it clear for you if and how you can get your FHA loan.

Until the Depression, rising real estate values made it possible for most mortgaged properties that were in default to be sold without a loss. This experience reinforced a widely held perception that insuring mortgages was a low-risk business. But the sharp decline in real estate values in the early years of the Depression–together with the low capitalization, questionable business practices, and weak regulation of the PMI industry–resulted in the collapse of the industry.

Government efforts to revive the housing industry during the Depression led to the establishment by the Federal Housing Administration (FHA) of the Mutual Mortgage Insurance Fund to provide mortgage insurance on FHA loans.(3) After World War II, the federal government’s role in providing insurance on mortgages expanded with the creation in the Veterans Administration (VA) of a mortgage insurance program for veterans.(4)

FHA and VA home loan insurance programs apply to a wide range of prospective homebuyers, but both programs have significant limitations. The FHA, for example, limits the size of the mortgages it will insure. The VA programs guarantee only a portion of the loan amount up to a congressionally established ceiling and are available only to veterans. In addition, the property and credit underwriting standards of both the FHA and VA exclude some prospective borrowers.

Among the steps lenders can take to mitigate credit risk is the requirement that borrowers whose mortgages have high loan-to-value ratios obtain private mortgage insurance.(8) PMI reduces credit risk by insuring against losses associated with default up to a contractually established percentage of the claim amount (see box, “Claims under Private Mortgage Insurance”). Defaults on these loans may result in a loss to the insurer; therefore PMI companies address credit risk in many ways in pursuing their business strategies:

* First, a PMI company may simply not insure a particular type of mortgage contract or a mortgage secured by a specific type of property, ceding that business to competitors.

* Second, in determining whether to insure a particular loan in a chosen line of business, PMI companies act as a review underwriter, evaluating both the creditworthiness of the prospective borrower and the adequacy of the collateral offered as security on the loan. They will deny insurance to prospective borrowers judged to impose undue credit risk on the insurer and lender; lenders, of course, are free to extend credit to such borrowers, but they must do so without the protection of PMI.

* Third, insurers may underwrite some mortgages more strictly than others and thus limit their exposure to losses.

* Fourth, they may charge a higher premium to insure riskier mortgages, although state regulation can limit or set the premiums charged for different types of mortgage insurance.

* Fifth, the PMI companies can limit the extent of their coverage of losses, either directly (by limiting the proportion of the mortgage insured) or by using reinsurance or pooling arrangements.

* Sixth, PMI companies can mitigate credit risk through credit counseling and early intervention once a borrower falls behind on payments.

In assessing the risk of the borrower, PMI companies evaluate both the ability and the willingness of the borrower to repay the mortgage loan. In determining the borrower’s ability to repay, insurers examine sources of income, debt-to-income ratios, asset holdings, employment history, and prospects for income growth. Insurers gauge willingness to repay primarily by reviewing the borrower’s credit history, including rent and utility payment records in some cases.

PMI companies also evaluate the characteristics of the property securing the mortgage. For example, because insurers generally perceive condominiums, manufactured homes, and properties with two, three, or four units as riskier sources of collateral than single-family detached dwellings, they usually treat them more stringently.

In addition, insurers consider the use of the property securing the mortgage. Dwellings to be used as vacation homes, second homes, or investment properties are generally underwritten to standards that are more strict than those for owner-occupied, primary residences. For example, the maximum loan-to-value ratio allowed for second homes is often lower than that for primary residences. In the extreme, some PMI companies have chosen not to offer insurance for particular uses of property, such as investment.

Furthermore, insurers examine the characteristics of the mortgage itself and adjust the price of insurance coverage accordingly. The loan-to-value ratio on the mortgage is a primary indicator of default risk; hence, the higher the ratio, the higher the premium.(9) Insurers also generally assess higher premiums on adjustable rate mortgages because these mortgages can potentially impose larger payment burdens on borrowers and because they have historically exhibited an inferior payment record.(10) Finally, insurers assess lower premiums on shorter-term mortgages because such mortgages result in a more rapid accumulation of equity by the borrower and therefore impose less risk of loss.

The PMI companies often use the credit underwriting guidelines of the two large government-sponsored mortgage agencies, the Federal National Mortgage Association (Fannie Mae) and the Federal Home Loan Mortgage Corporation (Freddie Mac), when deciding whether to approve an application. Many lenders desire to sell their mortgages to these agencies, and both Fannie Mae and Freddie Mac require PMI before they will consider purchasing a low-down-payment mortgage. Thus, PMI companies have a strong motivation to assure lenders that mortgages insured by PMI companies conform to the standards set by these organizations.

When examining the risks described above, many PMI companies rely heavily on automated underwriting systems to identify and quickly approve applications that are acceptable for insurance. PMI employees further evaluate applications that fail the automated review. Computer automation of underwriting thus allows PMI companies to focus their efforts on applicants with marginal or unusual credit histories and other special circumstances and is generally perceived to have widened the availability of PMI.

A fundamental strategy of insurance underwriting is to diversify risk.(11) In the case of PMI companies, risk diversification means limiting geographic concentrations of insurance, dealing with numerous lenders, and restricting the insurance written for any one particular project. The importance of these tactics is illustrated by the large losses in the 1980s of PMI companies that had significant concentrations of insurance in “oil patch” states.

An integral part of the PMI business is the management of problem mortgages. Foreclosing on properties is both time-consuming and costly, and insurers attempt to avoid it. Insurers try to work with delinquent borrowers, mostly through lenders, but sometimes directly with borrowers. Insurers often stress counseling as a way of helping borrowers overcome payment difficulties. Insurers will try to determine the prospects for bringing the mortgage back to scheduled payments and may work out a plan with the borrower to do so. In some cases, however, encouraging borrowers to sell their properties may be the least costly method, for both insurer and borrower, of resolving problems.

For borrowers with good credit, Fannie Mae has lowered mortgage-insurance costs to levels not seen since 1994. As a result, borrowers can put down as little as 5% on a home and purchase only enough mortgage insurance to cover 25% of the loan (down from 30%). That’s a savings of$110 a year on a $100,000 mortgage. If you make a larger down payment, accept a slightly higher interest rate or pay several hundred dollars more in closing costs, you can save even more money on mortgage insurance over the life of the loan.

Paying a slightly higher interest rate to lower the cost of insurance has an extra advantage. Although your monthly payment is usually the same, “you’re paying more in interest, which is tax deductible, whereas mortgage insurance is not,” says Michael Licamele, editor of Mortgage Almanac, an online publication.

But it’s probably not worth refinancing to take advantage of the lower premiums, says Gene Eisman of Fannie Mae, because refinancing costs would be higher than premium savings. “You would refinance for the usual reasons and get this as an added benefit,” says Eisman. Fannie Mae’s program is limited to home buyers whose mortgages are approved by the company’s automated loan-underwriting system. You can find a participating lender by calling 800-732-6643. So far, at least one mortgage-insurance provider has lowered its charges, and others are likely to follow.

COPYRIGHT 1999 The Kiplinger Washington Editors, Inc.
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