During the month of October we have seen a couple shifts in a 30-year fixed rate mortgage, for the good of the consumer and real estate market. During the first week of the month, we saw the rates drop down nearing all time lows since about Mid 2009, when the rate was at a 4.82 percent. On the 8th it was said by representatives of Fannie Mae that the rate had hit 4.87 percent, almost a whole percent lower than last year. The 15-year fixed rate also hit a low, at 4.33 percent, also a lot lower than it was this time last year. And also the lowest it has been since 1991, when the Market was at its peak.
What does this mean for the potential borrower and lenders? For the borrower it gives them more money to work with, when considering such an important purchase as a home. This is especially good news for those first time home buyers, trying to take advantage of the first time home buyer credit. Having a lower interest payment, calls for lower mortgage payments in general, in turn less of a chance for a borrower to go into default on their loan.
For lenders, its bringing in more mortgage applications since January 2009, giving them more hope that less borrowers will go into default, because of such high interest rates that we have seen in the past, in turn making every ones stress eased, at least for now. Many experts have said that the homeowners who are looking to refinance their current loan will benefit from this drop in rates more than a potential buyer looking to purchase.
Just because the rates are nearing an all time low, doesn’t mean lenders are going to give out loans to just anyone. You still must meet the high standards of the lender, and keep in mind, standards of borrowing vary by lender. They still want to be sure that they are going to get full repayment of any money borrowed. Having a solid credit score, income, and down payment are just a few of the things that lenders are really looking for in order to even consider you for a loan.
If you are considering taking advantage of these low rates, contact a mortgage professional to pre-qualify you before you waste your time shopping for your home. It is important to do this before hand, that way if you don’t get qualified you are not disappointed when you already have your heart set on a home. Make sure to review your credit reports, and have all your financial information ready prior to consulting with a Lender. Your lender will be able to find the right loan for you and your family. Don’t think for one second that you wont be able to get funding, because there are many alternative ways to go about it in todays market, if you qualify of course. Consult your lender today.
By: Yanni A Raz
Posts Tagged ‘Borrowers’
Mortgage Rates Drop For the Second Time in a Month
January 21st, 2010Commercial Mortgage Loan Types – Mezzanine Loans, More Than Just 2nd Mortgages
January 8th, 2010
Many people, even some experienced commercial real estate developers, mistakenly believe that a mezzanine loan is simply a 2nd position commercial mortgage loan against a commercial property. It is not, mezzanine financing is a highly sophisticated form of lending that requires specialized business and banking knowledge.
Many acquisition and development projects require additional financing beyond a traditional first mortgage. The simplest, fastest and least expensive method of borrowing in these situations is to have the seller or another lender write a traditional 2nd mortgage. Unfortunately, especially in today’s era of tightened credit, 2nd position liens are often impossible, due to an equity shortage, or disallowed by mortgage covenants mandated by the 1st position holder. The-fact-is that there are many scenarios where the option of a simple 2nd is just not available. These scenarios give rise to what’s known as mezzanine lending.
Unlike a mortgage, a mezzanine loan is not a lien against a piece of commercial real estate. It is a loan secured by the assets of a business entity. A title search will not turn up mezzanine loans because they are not attached to a properties ownership documents. In this way they do not violate any provisions of a 1st mortgage that precludes a 2nd.
With the cooperation of the borrower, a mezzanine lender sets up a single purpose, business entity, such as an LLC or a Trust. Title and ownership of the target real estate and corresponding businesses are placed in the entity so the whole project is owned by the new company. The company is run by the borrower. The actual mezzanine loan is made to the company but is also personally guaranteed by the principle borrowers. The loan is secured by the assets of the company (the real estate and its operations) and allows the lender to take over full ownership and operations in the event of default.
Although simple in concept, mezzanine lending is complex and difficult in practice. Attorneys for both the borrower and the lender must be very involved in drafting the provisions of the loan and making sure the new entity is properly set up and maintained. Borrowers want their rights protected while lenders need to make sure their security interest in the firm and, indirectly, the real estate is legally binding. Often the real estate, the borrower and the lender are domiciled in different States making the whole enterprise subject to interstate commerce regulations and further complicating the loan.
The legal and closing costs as-well-as maintenance costs associated with mezzanine loans are extremely high compared to conventional lending. For this reason mezzanine financing structures are wholly inappropriate for small deals. It’s very difficult to make mezzanine capital cost effective in projects worth under $10MM.
Mezzanine loans certainly have their place; their loan volume can be counted in the tens of billions of dollars. When they’re needed and when done correctly they are true deal savers. A partnership with a mezzanine lender can be an invaluable resource to a developer or commercial real estate investor. However, investors and developers need to understand exactly what a mezzanine loan is and be ready for the costs that come with them.
By: Glenn Fydenkevez
Bad Credit 2nd Mortgage
December 20th, 2009
Taking out a home equity loan is one of the time-tested ways to get out of debt. There are two general kinds of home equity loan available to borrowers with bad credit history – depending on your specific financial situation; you can either take a 2nd mortgage, or a home equity line of credit (HELOC). You need to know how each works in order to decide which one to apply for. Each has its uniquely different details and methods of dispensing payments to you, and of you paying them back.
If you need immediate relief from an overwhelming number of creditors demanding instant payment, you will benefit from a 2nd mortgage. This type of home equity loan allows you to borrow a fixed amount with a fixed interest rate, and is best for consolidating loans. Note, however, that interest rates for bad credit applicants are generally higher by a few percentage points. If your credit is bad but you still need money, you will unfortunately have to bite the bullet and take out a higher-interest loan.
If you need a steadier cash flow, consider a HELOC. It will allow you access to a decent credit limit at interest rates lower than traditional lines of credit. Be sure you control your spending, because unwise use of HELOC can get you into even more debt (and cause you to lose your home). Always consult and talk at length with a mortgage representative over many days before closing on a deal. Just remember that their job is to sell you a loan. Beware predatory lenders.
By: Kristy Annely