What to know before you take out a mortgage loan

You need to take out a mortgage loan if you don’t have the required cash to purchase a property. It is advisable that you know about mortgage terms and basic concepts of a home loan before you take out one. It will help you to choose a home loan that suits you the best in the long run. Read on to gather knowledge about mortgage basics.

How to obtain a mortgage
You can take out a mortgage loan from banks, mortgage companies, credit unions and portfolio lenders. You can also complete an online form and provide the necessary documents in order to apply for a mortgage.

Types of mortgage loans
There are mainly 2 types of mortgage loans, which are given below.

ARM (Adjustable Rate Mortgage) – It is a type of home loan with variable rate of interest. The interest rate remains fixed for a certain period after which it changes periodically.

FRM (Fixed Rate Mortgage) – In this type of mortgage loan, the interest rate remains fixed throughout the loan term.

Required documents
You need to provide certain documents to obtain a home loan. They are paystubs for the past 2 years, the borrower’s Social Security Number, income and address proofs along with the recent statements of deposit amounts, stocks and bonds.

Importance of credit repair
Apart from getting acquainted with various mortgage terms, it is quite important to check your credit score before you apply for a mortgage loan. If required, repair your bad credit record before applying for a home loan. You can get better interest rate on your home loan if you have a good score.

You can take help of online forums if you want to know about specific mortgage terms. You can post your query in order to get the answers from experienced professionals. It is advisable that your resolve all your queries before taking out a home loan. It will help you to choose the best mortgage.

Home Loan Modifications: How Do You Qualify?

If you’re one of the many homeowners hit by the economic crash, chances are you’ve looked into refinancing, short sales, and other ways to help you get back on track. But if you’re in serious default or are at risk of losing your home, your best bet may be a home loan modification. Also called a mortgage modification, this process involves negotiating with your lender for more comfortable mortgage terms. The government has launched a home loan modification plan, known as Home Affordable Modification Program, designed to help troubled homeowners get better terms.

Each lender has a different standard for granting loan modifications, but the general requirements are pretty much the same. Below are some common cases that may make you eligible for a home loan modification.

Financial hardship
Maybe you lost your job, got divorced, or had to pay emergency medical bills. These are all valid reasons (especially in this economy) for falling behind on your mortgage. Note that to qualify for a loan modification, the hardship has to be temporary and you have to have sufficient income. Provide bank statements or financial documents to show that you’ll be able to keep up with the modified loan.

Adjustable-rate mortgages
A lot of today’s home defaults can be attributed to adjustable-rate mortgages, most of which were issued during the sub-prime boom between 2004 and 2007. Once the teaser period ended and the rates reverted to normal, many homeowners found themselves unable to keep up. The government’s home loan modification program allows these homeowners to return to comfortable mortgage terms, so they can avoid foreclosure and save their credit.

Falling home values
Many people have found themselves unable to refinance because their home values have fallen, sometimes to a point where they owe more on the home than it’s currently worth. However, decreased home value alone won’t qualify you for a home loan modification, as home values are expected to rise and fall during the life of the loan. But combined with other factors, a decreased value can certainly increase your chances.

Lending violations
Sub-prime lenders have been found to violate a number of laws on fair lending, and you can use this to your advantage when applying for a home loan modification. Have a qualified loan modification attorney review your case and see if there are any violations you can use for leverage. With an experienced lawyer, you can negotiate more strongly with your lender and come out with a much more agreeable deal.

How to Avoid Home Loan Modification Scams?

Home loan modification is easily one of the best ways to save one's home and avoid foreclosure. But as more and more homeowners fall into default, more and more scams have also turned up. And when you’re on the verge of losing your home, the last thing you want is some fake firm who tricks you out of your money. That's why it's important to stay on guard, watch out for suspicious business, and work only with experienced professionals. This guide offers a few tips on avoiding home loan modification scams and finding the right people to help you out.

Look them up.
The Better Business Bureau (BBB) provides a list of legitimate companies and their ratings, whether or not they are signed up. If you're dealing with a loan modification attorney, the Bar Association can also be a good resource. Ask for client references and make a few calls to see what previous clients think of the company.

Don't pay upfront fees.
Upfront fees are the first sign of a loan modification scam. Some companies have been known to charge upwards of $7,000 upon initial consultation, before reviewing your file and without a guarantee of even starting the process. Don't be fooled by companies that try to "scare" you into paying up immediately.

Know their process.
At the outset, ask how the company handles loan modifications. The home loan modification process varies from case to case, and a good loan modification attorney will have a backup plan for every possibility. Find out what they normally do if the lender takes too long to respond, if the request is rejected, or if the first offer isn't good enough.

Make face-to-face contact.
The Internet has made it all too easy for scammers to reach potential victims. While you can find a good loan modification attorney online, it's still important to pay them a visit and make sure it’s a legitimate company. Don’t settle for an online or phone consultation; you need proof that you’re dealing with real professionals who know what they're doing.

Watch out for exact goals.
If a company promises to reduce your rate by a certain amount, chances are it's a scam. Again, home loan modification doesn't work the same way for everyone, so it doesn't make sense to set a single goal for every client. A good loan modification attorney will start by reviewing your case, and give you an estimate based on your situation.