Archive for the ‘Loans’ Category
What is a Lien?
October 2nd, 2009
Ronnica Rothe asked:
A lien is a legal claim over property that must be paid before selling the property the lien is on. Understanding liens is important when you make get a car loan, a mortgage, or do not pay your taxes or mechanic’s bills.
Consensual liens are not a problem for you or your credit rating in most cases. This is what happens when you take out a loan when purchasing a car or house. It is like the car or house is used as collateral for the loan. If you do not pay the loan, the company with the lien on your property has the right to take your property from you in order to recover the money you owe them. This type of lien only becomes a problem if you stop paying your bills, as you will then lose the car or house that you might need to live.
There are also involuntary liens which are a problem. An involuntary lien means that someone has placed a claim on your property because you owe them a significant amount of money. One kind of involuntary lien is a tax lien. Once you have a tax lien, it is on your public record permanently. This can occur when you do not pay your property or income taxes, and can be put on your property by local, state, or federal government. If you have a federal tax lien, it will stay on your credit report for 15 years, significantly damaging your credit score.
Another type of involuntary lien is a mechanic’s lien or construction lien. This type of lien occurs when you do not pay for your car repair or construction property bills. In the most extreme cases, the mechanic or contractor could take away your property in order to recover their losses. The best way to avoid this type of lien is to pay your bills.
A lien is a legal claim over property that must be paid before selling the property the lien is on. Understanding liens is important when you make get a car loan, a mortgage, or do not pay your taxes or mechanic’s bills.
Consensual liens are not a problem for you or your credit rating in most cases. This is what happens when you take out a loan when purchasing a car or house. It is like the car or house is used as collateral for the loan. If you do not pay the loan, the company with the lien on your property has the right to take your property from you in order to recover the money you owe them. This type of lien only becomes a problem if you stop paying your bills, as you will then lose the car or house that you might need to live.
There are also involuntary liens which are a problem. An involuntary lien means that someone has placed a claim on your property because you owe them a significant amount of money. One kind of involuntary lien is a tax lien. Once you have a tax lien, it is on your public record permanently. This can occur when you do not pay your property or income taxes, and can be put on your property by local, state, or federal government. If you have a federal tax lien, it will stay on your credit report for 15 years, significantly damaging your credit score.
Another type of involuntary lien is a mechanic’s lien or construction lien. This type of lien occurs when you do not pay for your car repair or construction property bills. In the most extreme cases, the mechanic or contractor could take away your property in order to recover their losses. The best way to avoid this type of lien is to pay your bills.
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Home Loan Modifications Explained
May 27th, 2009
Brian S. Icenhower asked:
Continuous declines in United States’ housing values after the mid-2000s caused an increasing number of borrowers to explore the loan modification process in an attempt to avoid losing their homes to foreclosure. Unfortunately, a large number of homeowners who sought to have their loans modified were thwarted by lengthy and impersonal negotiation processes imposed by lenders, the borrowers’ inability to qualify for modified loans, and the unwillingness of banks to modify loans to affordable levels. In addition, too many of the borrowers who were able to successfully navigate through the loan modification waters later learned that their diligent efforts were ultimately in vain as the United States Comptroller of the Currency reported that over half of the loans modified in the first quarter of 2008 went into default within six months. In order to prevent the loan modification process from beginning to resemble a futile quest for the Holy Grail, it is essential to examine some of the key issues surrounding loan modifications.
Loan Modification Goals
Generally speaking, the primary reason that borrowers seek to have their home loans modified is to reduce the amount of their monthly payments. This result can be achieved by reducing the interest rate of the loan, extending the repayment period of the loan, preventing an interest rate from adjusting upward, reducing the principal balance owed, eliminating a negative amortization term, adding delinquent payments to the balance, or any combination of the aforementioned. It is not surprising that the modification goal most sought by borrowers also happens to be the request lenders have been most unwilling to grant: principal balance reductions. Although reductions in balances create significant losses for banks, it should also be noted that homeowners have been generally unwilling to continue to make mortgage payments when they believe that their home’s value will not exceed the amount that they owe against the property. Therefore, the failure to reduce balances via the loan modification process, coupled with declining housing values, may account for the U.S. Comptroller of the Currency’s finding that the majority of loans become delinquent shortly after being modified.
The Process
Although loan modification procedures and requirements vary from bank to bank, the typical process begins with a borrower contacting the bank’s loss mitigation department to request a loan modification. The lender will then send a loan modification application and forms to the borrower to be completed and returned to the lender. The bank will also require other documentation to be provided by the borrower in support of the application. This documentation may include bank statements, tax returns, pay stubs, a hardship letter and an appraisal or broker’s price opinion to show the current value of the property. After all of the requested documentation has been received by the lender, a bank representative or negotiator will eventually contact the borrower to make a proposal of the new loan terms or simply reject the initial modification application altogether. The borrower then either accepts the bank’s proposal or negotiates new terms until an agreement is reached and new loan documents are formally executed. It is also advisable for the borrower to regularly contact the loss mitigation department throughout the process to ensure that all documentation is being received and that the modification request is proceeding in a timely fashion.
Obstacles to Modification
The most obvious obstacle to successfully modifying a home loan is the borrower’s inability to qualify for the new modified loan. Once again, lender eligibility requirements for modification can differ greatly. However, Fannie Mae and Freddie Mae have implemented a Streamlined Modification Plan to more effectively respond to the increasing number of loan modification requests. Under this plan, the borrower must satisfy the following criteria: 1) the borrower has not filed bankruptcy; 2) the borrower’s existing loan was originated prior to January 1, 2008; 3) the property securing the loan is owner-occupied and a single family residence; 4) the borrower is at least 90 days delinquent on the existing loan; 5) a 90% or higher loan-to-value ratio is present with the existing loan; 6) the payments after modification do not exceed 38% of the borrower’s gross monthly income; and 7) the borrower must successfully make 3 consecutive monthly payments after modification to demonstrate an ability to pay before the modification is formalized.
Also, lenders are generally under no legal obligation to modify loans for borrowers. Consequently, if a modification request becomes too cost prohibitive, banks will often take their chances with the foreclosure process instead. Lenders may also have inadequate staffing to handle the increasing number of modification requests without frequent borrower follow-up. A borrower’s property might also serve as security for more than one loan, and it can often be challenging to coordinate modification terms between multiple banks. Further, if the loan has been sold by the bank on the secondary loan market to any number of potential investors, the original loan will often be split into different fragments before pooling them with other portions of loans as mortgage-backed securities. In this case, it can be very difficult to coordinate with the many investors to obtain approval for the modification.
Finally, borrowers should be weary of a large number of fraudulent companies attempting to assist homeowners with the loan modification process. The mere fact that these companies are using seemingly reputable television commercials or websites as advertising mediums should not alleviate a borrower’s concerns. The rapidly increasing number of loan modification scam-artists has temporarily caught law enforcement off guard and it may take some time before these culprits are apprehended and their brazen actions are quelled. In the meantime, borrowers should be especially cautious when dealing with companies that demand fees in advance of any services to be provided as this practice in and of itself is prohibited by most state laws.
For further assistance with the loan modification process, it is advisable to contact an attorney or your local REALTOR®. In addition, the U.S. Department of Housing and Urban Development has a list of approved housing counseling agencies at www.hud.gov. When a borrower attempts to personally modify a home loan, it is essential to identify modification goals, understand the particular lender’s modification requirements, frequently check on the status of the application’s processing, and by very patient.
Continuous declines in United States’ housing values after the mid-2000s caused an increasing number of borrowers to explore the loan modification process in an attempt to avoid losing their homes to foreclosure. Unfortunately, a large number of homeowners who sought to have their loans modified were thwarted by lengthy and impersonal negotiation processes imposed by lenders, the borrowers’ inability to qualify for modified loans, and the unwillingness of banks to modify loans to affordable levels. In addition, too many of the borrowers who were able to successfully navigate through the loan modification waters later learned that their diligent efforts were ultimately in vain as the United States Comptroller of the Currency reported that over half of the loans modified in the first quarter of 2008 went into default within six months. In order to prevent the loan modification process from beginning to resemble a futile quest for the Holy Grail, it is essential to examine some of the key issues surrounding loan modifications.
Loan Modification Goals
Generally speaking, the primary reason that borrowers seek to have their home loans modified is to reduce the amount of their monthly payments. This result can be achieved by reducing the interest rate of the loan, extending the repayment period of the loan, preventing an interest rate from adjusting upward, reducing the principal balance owed, eliminating a negative amortization term, adding delinquent payments to the balance, or any combination of the aforementioned. It is not surprising that the modification goal most sought by borrowers also happens to be the request lenders have been most unwilling to grant: principal balance reductions. Although reductions in balances create significant losses for banks, it should also be noted that homeowners have been generally unwilling to continue to make mortgage payments when they believe that their home’s value will not exceed the amount that they owe against the property. Therefore, the failure to reduce balances via the loan modification process, coupled with declining housing values, may account for the U.S. Comptroller of the Currency’s finding that the majority of loans become delinquent shortly after being modified.
The Process
Although loan modification procedures and requirements vary from bank to bank, the typical process begins with a borrower contacting the bank’s loss mitigation department to request a loan modification. The lender will then send a loan modification application and forms to the borrower to be completed and returned to the lender. The bank will also require other documentation to be provided by the borrower in support of the application. This documentation may include bank statements, tax returns, pay stubs, a hardship letter and an appraisal or broker’s price opinion to show the current value of the property. After all of the requested documentation has been received by the lender, a bank representative or negotiator will eventually contact the borrower to make a proposal of the new loan terms or simply reject the initial modification application altogether. The borrower then either accepts the bank’s proposal or negotiates new terms until an agreement is reached and new loan documents are formally executed. It is also advisable for the borrower to regularly contact the loss mitigation department throughout the process to ensure that all documentation is being received and that the modification request is proceeding in a timely fashion.
Obstacles to Modification
The most obvious obstacle to successfully modifying a home loan is the borrower’s inability to qualify for the new modified loan. Once again, lender eligibility requirements for modification can differ greatly. However, Fannie Mae and Freddie Mae have implemented a Streamlined Modification Plan to more effectively respond to the increasing number of loan modification requests. Under this plan, the borrower must satisfy the following criteria: 1) the borrower has not filed bankruptcy; 2) the borrower’s existing loan was originated prior to January 1, 2008; 3) the property securing the loan is owner-occupied and a single family residence; 4) the borrower is at least 90 days delinquent on the existing loan; 5) a 90% or higher loan-to-value ratio is present with the existing loan; 6) the payments after modification do not exceed 38% of the borrower’s gross monthly income; and 7) the borrower must successfully make 3 consecutive monthly payments after modification to demonstrate an ability to pay before the modification is formalized.
Also, lenders are generally under no legal obligation to modify loans for borrowers. Consequently, if a modification request becomes too cost prohibitive, banks will often take their chances with the foreclosure process instead. Lenders may also have inadequate staffing to handle the increasing number of modification requests without frequent borrower follow-up. A borrower’s property might also serve as security for more than one loan, and it can often be challenging to coordinate modification terms between multiple banks. Further, if the loan has been sold by the bank on the secondary loan market to any number of potential investors, the original loan will often be split into different fragments before pooling them with other portions of loans as mortgage-backed securities. In this case, it can be very difficult to coordinate with the many investors to obtain approval for the modification.
Finally, borrowers should be weary of a large number of fraudulent companies attempting to assist homeowners with the loan modification process. The mere fact that these companies are using seemingly reputable television commercials or websites as advertising mediums should not alleviate a borrower’s concerns. The rapidly increasing number of loan modification scam-artists has temporarily caught law enforcement off guard and it may take some time before these culprits are apprehended and their brazen actions are quelled. In the meantime, borrowers should be especially cautious when dealing with companies that demand fees in advance of any services to be provided as this practice in and of itself is prohibited by most state laws.
For further assistance with the loan modification process, it is advisable to contact an attorney or your local REALTOR®. In addition, the U.S. Department of Housing and Urban Development has a list of approved housing counseling agencies at www.hud.gov. When a borrower attempts to personally modify a home loan, it is essential to identify modification goals, understand the particular lender’s modification requirements, frequently check on the status of the application’s processing, and by very patient.
Purchase Income Property through an Investment Loan
May 11th, 2009
David Nalin asked:
Buying income producing property is becoming a popular choice for people seeking to supplement their income creating an additional revenue stream. Real estate purchases will typically grow in value. Yet, many properties acquired through a structured financial plan using funds from an investment loan can produce income both part time and a full time.
An Investment Loan as Part of a Personal Growth Plan
As part of a strategic personal financial growth plan, an investment loan can be a valuable method toward obtaining financial independence. The actual structure of your investment loan is an important aspect affecting the return on your investment. Options available to investors today are quite similar in the same loans available for owner-occupied dwellings. A person seeking to invest in a secondary, or income-producing, property can use the same standard fixed and variable rates for home purchase. Not only will the same rates be available but the same loan features as well.
What are Investment Loan Features?
Just as is available for owner-occupied home loans, an investment loan will have the following features:
Redraw – allows access to additional funds paid into an investment loan if extra funds are needed. It is generally nit available with a fixed-rate loan. Additional repayments – This feature allows an investor to make extra loan repayments reducing the interest charged due to reducing the loan length term. This feature also is typically not available for fixed-rate loans. Repayment holiday – allows many borrowers the opportunity to forego repayments during specified periods. Although not making repayments during these times, interest still accrues on the balance. This feature may compel the need to make additional advance payments before the deferred period or may require a lump sum repayment after the deferred time. Investment loan repayments may need to be increased to activate this feature. Parental leave – allows to either reduce or defer repayments for a mutually agreed upon period after the birth or adoption of a child. Interest still accrues on the balance and a fee may be charged to activate this feature.
Planning Considerations for Investment Loan Funds
There also exist many traditional tax advantages when obtaining an investment loan. Before venturing into the world of purchasing property through the funds available from an investment loan, consulting a financial planner to ensure any purchase from you investment loan is a financially wise long-term choice. There are key factors to consider when investing in property including:
Sufficient infrastructure in place. Is a targeted investment property in an area with sufficient access to schools, medical facilities, shopping areas, freeways and other main roads? Capital growth has historically increased steadily during the past 20 years. Check out any potential growth plans including housing density increases or planned roads for increased traffic flow. When examining investment in new subdivisions, always check for similar planned developments nearby that may have a direct impact on the value of your targeted purchase. Many people prefer renting new homes compared to any three years or older. Establish an investment exit plan that will free you from financial consideration in any property purchased. For example, purchasing a new home in a new subdivision may call for sale of the property within three years when it outlives its rental popularity potential.
Use Internet resources to locate an investment loan suitable for your wealth creation planning needs.
Buying income producing property is becoming a popular choice for people seeking to supplement their income creating an additional revenue stream. Real estate purchases will typically grow in value. Yet, many properties acquired through a structured financial plan using funds from an investment loan can produce income both part time and a full time.
An Investment Loan as Part of a Personal Growth Plan
As part of a strategic personal financial growth plan, an investment loan can be a valuable method toward obtaining financial independence. The actual structure of your investment loan is an important aspect affecting the return on your investment. Options available to investors today are quite similar in the same loans available for owner-occupied dwellings. A person seeking to invest in a secondary, or income-producing, property can use the same standard fixed and variable rates for home purchase. Not only will the same rates be available but the same loan features as well.
What are Investment Loan Features?
Just as is available for owner-occupied home loans, an investment loan will have the following features:
Redraw – allows access to additional funds paid into an investment loan if extra funds are needed. It is generally nit available with a fixed-rate loan. Additional repayments – This feature allows an investor to make extra loan repayments reducing the interest charged due to reducing the loan length term. This feature also is typically not available for fixed-rate loans. Repayment holiday – allows many borrowers the opportunity to forego repayments during specified periods. Although not making repayments during these times, interest still accrues on the balance. This feature may compel the need to make additional advance payments before the deferred period or may require a lump sum repayment after the deferred time. Investment loan repayments may need to be increased to activate this feature. Parental leave – allows to either reduce or defer repayments for a mutually agreed upon period after the birth or adoption of a child. Interest still accrues on the balance and a fee may be charged to activate this feature.
Planning Considerations for Investment Loan Funds
There also exist many traditional tax advantages when obtaining an investment loan. Before venturing into the world of purchasing property through the funds available from an investment loan, consulting a financial planner to ensure any purchase from you investment loan is a financially wise long-term choice. There are key factors to consider when investing in property including:
Sufficient infrastructure in place. Is a targeted investment property in an area with sufficient access to schools, medical facilities, shopping areas, freeways and other main roads? Capital growth has historically increased steadily during the past 20 years. Check out any potential growth plans including housing density increases or planned roads for increased traffic flow. When examining investment in new subdivisions, always check for similar planned developments nearby that may have a direct impact on the value of your targeted purchase. Many people prefer renting new homes compared to any three years or older. Establish an investment exit plan that will free you from financial consideration in any property purchased. For example, purchasing a new home in a new subdivision may call for sale of the property within three years when it outlives its rental popularity potential.
Use Internet resources to locate an investment loan suitable for your wealth creation planning needs.
Buying income producing property is becoming a popular choice for people seeking to supplement their income creating an additional revenue stream. Real estate purchases will typically grow in value. Yet, many properties acquired through a structured financial plan using funds from an investment loan can produce income both part time and a full time.
An Investment Loan as Part of a Personal Growth Plan
As part of a strategic personal financial growth plan, an investment loan can be a valuable method toward obtaining financial independence. The actual structure of your investment loan is an important aspect affecting the return on your investment. Options available to investors today are quite similar in the same loans available for owner-occupied dwellings. A person seeking to invest in a secondary, or income-producing, property can use the same standard fixed and variable rates for home purchase. Not only will the same rates be available but the same loan features as well.
What are Investment Loan Features?
Just as is available for owner-occupied home loans, an investment loan will have the following features:
Redraw – allows access to additional funds paid into an investment loan if extra funds are needed. It is generally nit available with a fixed-rate loan. Additional repayments – This feature allows an investor to make extra loan repayments reducing the interest charged due to reducing the loan length term. This feature also is typically not available for fixed-rate loans. Repayment holiday – allows many borrowers the opportunity to forego repayments during specified periods. Although not making repayments during these times, interest still accrues on the balance. This feature may compel the need to make additional advance payments before the deferred period or may require a lump sum repayment after the deferred time. Investment loan repayments may need to be increased to activate this feature. Parental leave – allows to either reduce or defer repayments for a mutually agreed upon period after the birth or adoption of a child. Interest still accrues on the balance and a fee may be charged to activate this feature.
Planning Considerations for Investment Loan Funds
There also exist many traditional tax advantages when obtaining an investment loan. Before venturing into the world of purchasing property through the funds available from an investment loan, consulting a financial planner to ensure any purchase from you investment loan is a financially wise long-term choice. There are key factors to consider when investing in property including:
Sufficient infrastructure in place. Is a targeted investment property in an area with sufficient access to schools, medical facilities, shopping areas, freeways and other main roads? Capital growth has historically increased steadily during the past 20 years. Check out any potential growth plans including housing density increases or planned roads for increased traffic flow. When examining investment in new subdivisions, always check for similar planned developments nearby that may have a direct impact on the value of your targeted purchase. Many people prefer renting new homes compared to any three years or older. Establish an investment exit plan that will free you from financial consideration in any property purchased. For example, purchasing a new home in a new subdivision may call for sale of the property within three years when it outlives its rental popularity potential.
Use Internet resources to locate an investment loan suitable for your wealth creation planning needs.
Buying income producing property is becoming a popular choice for people seeking to supplement their income creating an additional revenue stream. Real estate purchases will typically grow in value. Yet, many properties acquired through a structured financial plan using funds from an investment loan can produce income both part time and a full time.
An Investment Loan as Part of a Personal Growth Plan
As part of a strategic personal financial growth plan, an investment loan can be a valuable method toward obtaining financial independence. The actual structure of your investment loan is an important aspect affecting the return on your investment. Options available to investors today are quite similar in the same loans available for owner-occupied dwellings. A person seeking to invest in a secondary, or income-producing, property can use the same standard fixed and variable rates for home purchase. Not only will the same rates be available but the same loan features as well.
What are Investment Loan Features?
Just as is available for owner-occupied home loans, an investment loan will have the following features:
Redraw – allows access to additional funds paid into an investment loan if extra funds are needed. It is generally nit available with a fixed-rate loan. Additional repayments – This feature allows an investor to make extra loan repayments reducing the interest charged due to reducing the loan length term. This feature also is typically not available for fixed-rate loans. Repayment holiday – allows many borrowers the opportunity to forego repayments during specified periods. Although not making repayments during these times, interest still accrues on the balance. This feature may compel the need to make additional advance payments before the deferred period or may require a lump sum repayment after the deferred time. Investment loan repayments may need to be increased to activate this feature. Parental leave – allows to either reduce or defer repayments for a mutually agreed upon period after the birth or adoption of a child. Interest still accrues on the balance and a fee may be charged to activate this feature.
Planning Considerations for Investment Loan Funds
There also exist many traditional tax advantages when obtaining an investment loan. Before venturing into the world of purchasing property through the funds available from an investment loan, consulting a financial planner to ensure any purchase from you investment loan is a financially wise long-term choice. There are key factors to consider when investing in property including:
Sufficient infrastructure in place. Is a targeted investment property in an area with sufficient access to schools, medical facilities, shopping areas, freeways and other main roads? Capital growth has historically increased steadily during the past 20 years. Check out any potential growth plans including housing density increases or planned roads for increased traffic flow. When examining investment in new subdivisions, always check for similar planned developments nearby that may have a direct impact on the value of your targeted purchase. Many people prefer renting new homes compared to any three years or older. Establish an investment exit plan that will free you from financial consideration in any property purchased. For example, purchasing a new home in a new subdivision may call for sale of the property within three years when it outlives its rental popularity potential.
Use Internet resources to locate an investment loan suitable for your wealth creation planning needs.