A short and simple guide to home mortgage loans

For buying a house, it is necessary for most people to take out a home mortgage. Mortgage loans are big loans which are sanctioned by keeping your house as collateral. If you’re planning to buy a house in the near future, then you must conduct a good deal of research about home mortgage loans. This article describes about the types of mortgage loans and provides guidelines to understand how much house you can afford.

Home mortgage loans: Types

Mortgage loans can be of many types. There can be amortizing mortgage loans and non-amortizing mortgage loans. In case of amortizing mortgage loans, both the interest rates and the principal amount would have to be paid within the term of the loan. On the other hand, in case of non-amortizing loan, only the interest rates would have to be paid during the term of the loan. The principal amount would have to be paid at the time of loan maturity. Amortizing home mortgages can be of 2 types:

  • Fixed rate mortgage – The interest rate for a fixed rate mortgage remains the same for the entire term of the loan. In case of a fixed-rate mortgage, you’d not have to worry about fluctuating interest rates due to changing market conditions.
  • Adjustable-rate mortgage – In case of an adjustable-rate mortgage, the interest rate can keep on changing from time to time. It can remain fixed in the initial years, after which the rates will fluctuate. The interest rate in the initial years can be quite low as compared to the interest rates of fixed rate mortgages.

How much house you can afford?

Before taking out a mortgage, it is very important to consider how much house you can afford so that you can make proper payments for your home mortgage. Lenders have their own criteria to figure out how much house you can afford. These include front-end ratio, back-end ratio etc. You should also analyze how much mortgage you can borrow. Follow the guidelines given below:

  • Obtain a clear understanding of your financial situation by analyzing your total monthly income and your overall monthly expenses. Consider all forms of expenses including payments for your debts.
  • Include the additional costs that come along when a house is bought. For example: property taxes and maintenance costs.
  • Include your future plans. For instance: If in a few years you’ll be required to spend money on your kid’s college education.
  • After a thorough understanding, check if you can cut down on your monthly spending. Try to omit unnecessary expenses. Calculate how much money you’ll be left. According to that, you can figure out how much payment you can make for your mortgage.

Keep in mind the above mentioned guidelines while you take out a home mortgage for buying a house.



Who can buy a HUD home

Who can buy a HUD Home?

This is a tricky question to answer. From a wide look at it anybody who can secure a mortgage or who has cash to purchase a HUD home can buy a HUD home. With this said HUD has some limitations and or conditions or requirements. Some homes are strictly for own occupant buyers, and owner occupant means primary residence. These homes have a thirty day window where only primary residence can purchase these homes. After thirty days anybody can purchase them. There are other ones designed for non profit organizations, and other ones that require FHA financing with escrow repair, FHA 203k financing, conventional financing, or cash.  These different categories can open up the homes non primary residence sooner.


How to become a Contributor

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Your content and articles must be value adding. If you are not adding value your post will be removed.

Send me an email sanson.james@gmail.com to request to be a contributor.


How are HUD homes sold?

How are HUD Homes Sold?

The most common way a HUD home is sold is through a bidding process online. HUD places a bid deadline, so you must review the home and submit your bid prior to the bid deadline expiring.  All bids are defined as blind and sealed bids, which means nobody knows what the other person bid on the home. In turn, you need to bid to win if you want the home.  HUD will look at the highest net offer. The bid with the highest net to HUD is selected as the provisional winner subject to receipt of all required documents.

Some things to remember, if you are bidding using FHA financing the list price is the as-is FHA appraised value. This price can be less than what you could pick the property up buying a non HUD home vs a non HUD home. However, if the price is less and the house gets bid up then you have to pay the difference out of pocket. It is important to understand this, and it is important to look at comparable properties prior to submitting a bid. HUD will also give you a free termite report and provide the house free of termites when using FHA financing. All buyers get a free general home inspection report too, but are encouraged to do their home home inspection.

If you are bidding not using FHA financing, and you bid over the list price then you are subject to paying the difference if the home appraises for less than what you bid. If it appraises for or more than what you bid then you do not have to pay the difference.  The appraisal can always be a little tricky when bidding more. Finance type is very important when you are doing this.

The most important thing when you are buying a HUD home is that you have a HUD home specialist representing you. There truthfully are not that many specialist out there in my book. Many agents will do them when their buyer likes one, but they do not focus on HUD homes.


Do Not Ignore Your Credit Score

There are a few ways to improve your credit score, and you should become proactive and begin the process as soon as possible. Is your credit debt balance more than 10% of the allowable limit? If so you should think about paying it down to 10% or less (for example your limit is $1000, so you should seek to have your balance be $100 or less).  Are you paying your credit card payments? If so you should start paying your credit payments on time. Do you have little small collections? If so you should consider attempting to settle them for example 10 cents on the dollar and see if you can get them to completely remove them from your credit report.  I would consider pulling your credit with EquiFax.com and sign up for the 3:1 program, so you can control and manage your credit. Your credit score is a reflection of you actions and decisions, so let’s get your credit ready for those snooty banks. It is easier to start now rather than waiting for the last second.


Mortgage Basics

In today’s world of buying a home you will want to get the basics put together prior to meeting up with a mortgage lender. There are two very common loan types call traditional credit and alternative credit. Traditional credit will be FICO score driven, and alternative credit is based on rent, utilities, car insurance, etc. Where traditional credit will show up on a credit report commonly, alternative credit will commonly require 12 months written and verifiable on time payments to four sources.

Many common things you could be asked for:

  • Federal or State ID
  • Social Security Card
  • Last two years w2s
  • Last two years tax returns
  • Last two months of bank statements – give them new ones as they com in
  • Last months pay stubs – give them new ones as they come in
  • Two years same type of employment W2, self employed, 1099

Common things people do wrong prior to getting a home mortgage. They buy their car on a loan, pay all of their bills with cash vs paper trailing it with checks, and worse of all they think they cannot become a home owner for one reason or another.

Finally, understand there are all kinds of government down payment assistance programs, and some loans even offer zero down programs.


What is a HUD Home?

A common question in the HUD home world is just what is a darn HUD home anyways. In real estate sales a HUD home is an FHA mortgage (Federally Insured Mortgage) that was defaulted on for one reason or another, and the bank foreclosed on the home and filed an FHA Mortgage Insurance claim. Then since the home had FHA Mortgage insurance the government takes the home back, and sells it.

Remember a HUD home is not a home in a certain area. You kind basically find HUD homes in any city or zip code that has FHA mortgages. It is not a house thing, but a mortgage thing.