The Mortgage

Shop Carefully for Your Mortgage

What is a Mortgage

Mortgages are loans generally secured by real estate, although any property the lender is willing to accept as collateral can be used. Because the lender has security, interest rates are substantially lower than those available with most other types of credit.

The mortgage itself, a lien, is registered with the clerk of the county where the property is located.

Why It is Hard to Get a Mortgage Right Now

For various reasons, more fully discussed in The Subprime Mess, interest rates have been kept artifically low foe some time now. However, this did not prevent some borrowers from facing mortgage payments they could not afford, in turn leading to a rise in home foreclosures, people walking away from their homes, a crash in some areas of housing prices, and close to a near collapse of the worldwide banking system.

Bailouts are already under way and politicans are promising more, so this mess might take years to resolve itself.

However, the effect is being felt just about everywhere. Very few people can buy a house without a mortgage. And a mortgage is the biggest and most complex financial transaction most people get involved with.

Not too long ago, just about anybody with a pulse would qualify for a mortgage. Sadly that is no longer the case.

It appears that only those with the best credit scores, can even qualify for a loan. This is also generally true if you are putting down a substantial amount of money, in other words, borrowing a smaller percentage of the value of the house you are buying.

But there is both a lack of liquidity in the financial world and a growing unwillingness on the part of lenders to assume more risk.

For those with less than pristine credit, it is a time to rent until the storm passes.

In order to avoid having to but expensive mortgage insurance, you generally have to put down at least 20% of the purchase price. Mortgage insurance can run into the thousands a year and may be hard to cancel once you have gotten your equity up to 20%.

There are all sorts of mortgages: first, second, home equity lines of credit, VA, FHA, jumbo, ARM,s, fixed rate, etc. You can find a plan tailored to just about any need. Each has its own pros and cons and costs. It can take a lot of study to determine which type is the best for you, before you even start getting into interest rates and other terms.

See Mortgage Terms Explained for more information.

Mortgage Benefits

Mortgage interest is generally tax deductible up to certain limits, which is why converting costly credit card debt to lower interest second mortgages is such a popular pastime. However there are limits.

Interest on up to $1 million in mortgage debt and up to $100,000 of home-equity debt may be deductible (for first and second houses only). Like everything in the IRS code, all is not that simple. If you’re a high earner with big mortgages consult your accountant. There may be limits on your interest deduction.

Cons

Of course, you must keep up with your payments or you can lose you home. You house can generally be foreclosed upon if you don’t make your payments or it can be seized for non-payment of property taxes. Banks generally collect money for the taxes (and property insurance premiums in some cases) along with your mortgage payments, so these things are taken care of and the bank has additional protection.

A mortgage is one of the most costly contracts you will ever enter into. Small differences in terms can cost thousands over the life of the loan. It pays to shop around and to carefully compare deals.

Beware of potential conflicts of interest if you are getting mortgage advice from your realtor or a mortgage broker recommended by the realtor.

Make sure your mortgage broker is putting your interests first.

The only way to know for sure is to consult multiple brokers and bank mortgage departments and, in an environment where rates are fluctuating, to do it on the same day, if possible, so you are making valid comparisons.

A mortgage is one of the ways using other peoples money can lead to a better life and maybe even some profit for you.

More Articles on Mortgages

Bad Credit Loans
How to save on bad credit loans, mortgages and credit cards.

The Best Mortgages
Tips on how to find the best mortgage deals.

Co-Signers
Co-signers beware.

Credit Scores and Mortgage Rates
The effect of low scores on mortgage rates.

Different Mortgage Types Explained - Part One
What the different mortgages are and how to use them.

Different Mortgage Types Explained - Part Two
What the different mortgages are and how to use them.

Different Mortgage Types Explained - Part Three
What the different mortgages are and how to use them.

Different Mortgage Types Explained - Part Four
What the different mortgages are and how to use them.

Finding the Right Mortgage
How to find the right mortgage and save thousands.

FHA Mortgage Guarantees
The FHA is designed to help first time and low income home buyers.

How to Avoid Foreclosure
Steps to take to avoid foreclosure of your home.

Interest Only Mortgages
Are interest only mortgages the answer to high housing costs?

Mobile Home Loans
How to protect yourself when shopping for mobile home loans.

Mortgage and Auto Loan Prequalifications
Why prequalifying for a loan makes sense.

Mortgage Down Payments
Sources of mortgage down payments.

Negotiating with Lenders
You have to realistic when renegotiating mortgage terms with lenders.

Post Bankruptcy Mortgages
It is possible to get a mortgage after bankruptcy.

Predatory Lending Practices
How to tell if you're a victim of predatory lending practices.

Alert Yourself to Predatory Lending Practices
Educate yourself and avoid predatory lending practices.

PMI - Private Mortgage Insurance
The ins and outs of PMI.

Refinance vs. Home Equity Loan
The pros and cons of each type of loan.

HELOC or Second Mortgage
Which is the best home equity choice.

Is It Time to Refinance?
Interest rates are going up. It's time to refinance if you have a short term ARM.

Reverse Mortgages
If you can stomach the costs, reverse mortgages can be ideal for elderly homeowners.

Credit Insurance
Do you need credit insurance?

Bad Credit Home Equity Loans
Should you use the equity in your home to salvage your credit score?

Refinancing Considerations
Some things to consider if you are planning to refinance your mortgage.

The Subprime Mortgage Mess
The causes and effects of the subprime mess.

VA Mortgage Guarantees
How the VA can help you get a mortgage.

Your Credit Report
Why your credit card is so important and why you should take advantage of a new law allowing you a free copy every year.

Online Credit Reports
Why not get your credit reports online?

Your Credit Score
How your credit score is determined and how to control it.

Credit Score Facts
How credit reports and scores are used.

How Your Credit Score Effects Your Financial Well Being
Factors to be aware of.

What's Your Credit Score Worth to You?
The high cost of a low credit score.

Your Bankruptcy Risk Score
Do you have to know your bankruptcy risk score?

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