Your Mortgage’s Hidden Story

There are three stages in the life of a mortgage: origination, funding and servicing. The origination phase is where the borrower and loan professional sit down and determine the best course of action for the borrower. 

Once this process is complete, and the borrower goes to the closing, the money is given to the borrower and/or seller, in what is called loan funding.  Once the loan is funded, it needs to be serviced.  This means collection of payments, escrows, and the disbursement of those escrows to the tax collector, insurance company, etc.  This servicing can be done by either the lender itself, or contracted out to what it called a servicing company.

Regardless of who services the loan, the loan itself is either kept by the original lender, in what is called a portfolio, or sold to investors.  Borrowers give lenders this right to sell their loans, through a loan servicing agreement.  The original lender agrees that the terms of the loan will remain the same, regardless of who owns it, and loans may be sold multiple times.

When they are sold, mortgages of similar types and borrower grade, based on creditworthiness, are bundled together into what are called Mortgage Backed Securities, or MBSs.  These securities are bought by and sold to investors around the world, similarly to other types of securities. 

As with any other type of security, and as you might expect, they also carry risks to the investors that own them.  Riskier and less creditworthy borrowers, many of whom are starting to default on loans that have been bundled, with like loans into these securities, are causing the securities themselves to lose value.

For more information contact Team LoanOfficeUSA at 877-885-6872 or visit us at www.loanofficeusa.com.

Investment Properties: What You Need to Know

Before looking at properties, determine first what the current market rents are for the property type you have in mind in your area. 

An experienced real estate agent or property appraiser should be able to tell you this. 

You can then determine what your net income on the property would be each month (also remember the tax benefits, if any) after factoring in regular and unforeseen maintenance expenses.

Determine also your long-term strategy for owning the property. 

Will you be willing or able to break even, or potentially take a loss on the property each month, anticipating a high sales price in the future?  Will you be able to hold the property during times of declining property values, as we are experiencing now?

Getting a Mortgage

Mortgage lenders will typically charge a higher interest rate (one or more percent) on an investment property than they would on a property that a borrower will live in.

This is partly due to the fact that both renters and the rental market itself can be unpredictable.  

In calculating their risk, things that lenders look at when considering to lend on a rental property are:

• How much money will the borrower be putting down?  Typically lenders want between 10% and 25% (for first time investors) to show the borrower has a vested interest in the property and wants to make it work.
• Landlord experience: How long has the borrower been managing rental properties, if at all?
• Income and assets: Will the borrower have enough money in the bank to cover the mortgage, taxes, and other expenses if the property is vacant for an extended period?  Typically lenders want six months in reserves.

For more information, contact Team LoanOfficeUSA at 877-885-6872 or visit us at www.loanofficeusa.com.

Earn Money from Your Home

 

A reverse mortgage is simply a mortgage where a lender will lend a borrower money against the equity in the home in which he or she lives.  Repayment to the lender, unlike in a traditional mortgage, will occur after the borrowers have either passed away, sell the property, or permanently move out of it due to health reasons.

What Qualifies You for One?

The minimum eligible age to receive a reverse mortgage is 62.  The older a borrower is, the more money he/she will be able to borrow against the property (minus the cost of the reverse mortgage itself) regardless of the amount of equity in it.

Borrowers will have access to most, but not all, of the equity in the property.

Credit checks are not normally required by lenders–although they do get a copy of the title to the property to determine if there are any liens against it–which could affect the amount of available equity.

Often the reverse mortgage will be used to pay off an existing mortgage, or mortgages, thereby making the reverse mortgage the only lien on the property.

There are typically three ways in which borrowers receive the funds from a reverse mortgage. They are:

• A line of credit.  This is the most common way.  Similar to a home equity loan, the borrowers would only draw, and accrue interest on, the money that they use.
• In a lump sum, paid when the reverse mortgage is taken out.
• In a fixed payment stream.

For more information, contact Team Loan Office USA at 877-885-6872 or visit us on the web at www.loanofficeusa.com.