Category: Accounting

Take Your Mortgage Learning to the Next Level

Mortgage Secrets There are many secrets of the mortgage industry about which the average person may not be informed. When explaining some of them, we’ll go over some key secrets that can be very useful in understanding how mortgage companies, borrowers, and servicers work. Mortgage companies are in business to make money, just like any other corporation, and they do a great job there. There are many things you would rather not know about the industry, mortgage companies. We’re going to cover some of them in here. Island Coast Mortgage

Teaser or Adjustable Rates When the mortgage industry was hot and in the early 2000’s many people across the country were buying real estate, mortgage companies were delighted with all the new business they were having. That was during the time when credit was quickly handed out to almost anyone with a job, and or had reasonable credit. The business was booming and we have had the highest rate of homeownership ever in this country’s history. There were a few real estate agents making millions selling high-priced real estate, and there was a strong need for loan officers to close on that offer. The lending institutions began to hire taxi drivers, pizza delivery man, fast-food restaurant staff or anyone with a high school diploma and had the opportunity to fellow amazing money with simple instructions. Many of these people came from minimum wage jobs and began making $20-40,000 a month to close mortgage deals. Their income rapidly transformed.

Then after the new home buyers started to fizzle out, homeowner began to become late on payments and former buyers needed new cash infusions, then the refinancing period arrived. Between 2002 and 2007 refinancing ruled for years. Banks and mortgage companies began refinancing all those homeowners who took out home loans a year or two ago and now had equity, and in a short space of time many new homeowners also had tons of equity. These low interest or discount rates, also known as adjustable mortgage loans (ARM), have been drawn into these. Such loans offered for a fixed time span, usually up to around 5 years, a great new low rate. Then the rate starts to change after that period passed, and sometimes like mad. The rates were adjusted based on the tariff provided by the London Interbank (LIBOR).

A standard ARM loan will start somewhere around a 3 percent interest rate for 3 years, and then continue to change for the rest of the loan’s existence, perhaps every 6 months. Adjustment to 1St does not push more than 3 points upwards. For example, if you began with an interest rate of 5 percent and your loan is now ready to adjust your interest rate for the next 6 months, it won’t go up more than 3 percent= 8 percent interest rate, and so on. Your interest rate usually has a ground and a ceiling; which is the lowest and highest possible percentage of the loan. Mortgage companies used ARM loans to distribute money to attract more borrowers in search of quick refinancing money, and then borrowers in most cases watch their interest rates go up a lot. This kind of loan is usually a good option in a solid, appreciating real estate market, and also good if you plan to stay away from home for more than 5 years; otherwise it might not be wise to keep this kind of loan on a long-term basis.

Property Tax Sales Property tax is expected, unlike living in an apartment, if you want to buy a home. Property taxes also pay for schools, bridges, teachers, police officers, firemen and other community services among others. If you don’t want to pay property taxes or expect to pay them you shouldn’t buy a home. Generally when someone purchases a house in any year their taxes are not due on a pro-rated basis until the next year. You are being pro-rated for the year you purchased the property and the whole year you may not have had the home in your name, so your 1St year’s taxes are typically pr-rated.