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Home Loan Lessons Learned |
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Author: M.K.G.
Home Loan Lessons Learned
Perhaps an analysis of my home loan and how I came about it can aid you in
your quest for the best home loan. Avoid the mistakes I made.
The early days.
When my wife and I first got married, we
realized it would take some time to build our credit and get a home loan.
So for our first year together we rented an apartment. It did not take
long for us to decide an apartment was not where we wanted live. Besides
throwing rent away, you have to put up with noisy, problematic neighbors.
Though we did not have children at the time, we were concerned about letting
them play in a neighborhood that had so many strangers coming and going.
We inquired about a home loan with a local bank and we were told that we needed
to build our credit before we would be eligible for a home loan.
Mobile home loan
Not long after that we stopped by a
mobile home sales lot (which turned out to be a big mistake). Being young
and naive, we ended up falling for the sales pitch, mainly because the salesman
insisted we would have no problem selling when we were ready for a house.
Though we did not yet get a home loan, we did apply for mobile home financing
which is different from a home loan. Mobile home financing rates are much
higher and easier to get than a home loan. For the next few years we were
content living on a one acre lot in our quaint little mobile home.
However, the day came when we decided that we were ready for a house. We
checked back in with the bank and learned our credit score was well above where
it needed to be for a home loan.
Our home loan
We tried for the next year to sell our
mobile home but despite what the salesman had told us, we could not find an
eligible buyer. During this time period, we moved out and relocated to
another area. We both had new jobs and assumed a home loan was out of our
reach. Not being sure what to do, I visited a home loan website and sent
an email inquiry to the lender. I explained that my wife and I both had
new jobs and were looking for a lender that could finanace our home loan.
The next I received a call from the lender. I learned that our job time
was not that important! As long as we both had careers in the same field,
we qualified for the loan. I also learned that having a rental property
(with a loan) would not hurt our debt to income ratio. We just needed a
written one year lease from the tenant. We were so excited that we began
looking for a house right away.
Our situation.
Upon locating the house we wanted, we
submitted the loan paperwork. A closing date was set and we were on our
way to home ownership. Now, a few years later we are researching the best
home loan rates to refinance our house. Our rate is adjustable and it has
increased significantly each year. This is why we have decided to get a
new home loan.
If I could do it over.
If I could start the process over
I would NEVER have bought the mobile home. Though it was nice for us at
first, it has been nothing but a headache since then. Next, I would have
done more research before getting the home loan. Lenders WANT our
business, they should be struggling to impress us, not the other way
around. There are some wonderful tools available for those searching for
the best home loan. I have found some very favorable home loan rates by
searching with these online tools. I feel that my wife and I rushed ourselves and
would have benefitted by checking into things first. One thing I would
seriously consider is a bi-weekly home loan program.
Information on bi-weekly payments
Bi-weekly mortgage
payment programs are a great way to save money over the life of your home loan
and they're availble from most larger lenders. In a nutshell, your
payments are made every two weeks as opposed to once monthly. This way,
the interest on your loan only builds for 14 days instead of 30 or so.
This alone saves you mountains of money. Also, you end up making 26 half
payments on the year. That's like making one extra monthly payment each
year. The extra money goes toward the principal, thus reducing the money
you spend on interest over the life of your home loan. Here's an
example.
A conventional monthly loan ($100,000 for 30 years at
7%)
Length of loan: 30 years
Payment Amount: $665.30
Interest
Paid: $139,511
A bi-weekly loan ($100,000 for 30 years at 7%)
Length of
loan: 23.7 years (paid off 6.3 years early)
Payment Amount:
$332.65
Interest Paid: $105,047 (save $34,464)
The savings with a bi-weekly plan are significant. This type home loan
payment plan is a good idea for anyone with a home loan in my opinion. In
addition to bi-weekly plans, there are other options. I have located a
service that promises to beat the bi-weekly plans without changing your current
loan. I'm not exactly sure how this can be done but the article pasted
below may shed some light on things Check out this plan here.
The following is an article by Craig Romero
regarding interest savings techniques.
97% Of American Homeowners Overpay Their Lender In Mortgage Interest Every
Month.
If you own a home, have just re-financed or are shopping for a mortgage,
you'll be outraged.
Housing: Americans across the country were shocked to hear of a new poll that
states 97% of homeowners here in America are overpaying millions of dollars each
month in mortgage interest.
The National poll was conducted last month to determine how many homeowners
take advantage of the prepayment loophole in our mortgage system, which
eliminates costly interest overpayments.
The shocking results showed only 3% of America's homeowner population utilize
this loophole and take advantage of the valuable benefits created by it.
When Sean Drover, a Chicago businessman and homeowner found out he was
overpaying $217 in mortgage interest every month, he was appalled.
"Honestly, I was sick to my stomach when I thought back on all the monthly
payments I'd made. If I would have known about the pre-payment loophole when I
first bought my home I could have put all that money into equity instead of my
lenders pocket."
The problem lies with what the banking industry calls "front loading". This
is when the majority of a homeowner's payment is applied towards the interest on
the loan instead of the original amount borrowed.
The disturbing fact about front loading is it ensures you'll pay over three
times the original amount borrowed. Thus, resulting in enormous profits coming
straight out of your pocket and directly into your lenders.
… Most people (97%) never stop and take a good look at how damaging the
system really is. Unfortunately, it's just the way conventional mortgages are
structured here in America.
Average Homeowner overpays $60,000
In fact, the average homeowner in America is overpaying $2000 in mortgage
interest every year, or $60,000 over the life of the mortgage.
"That's an enormous amount of money". Says top mortgage analyst, Craig
Romero. "This is money that homeowners are needlessly giving away each year.
Imagine what a person could do with an extra $60,000.
While gaining back thousands of dollars from these overpayments is a huge
benefit, it's not the only one. Cutting up to 10 years from the term of a
traditional mortgage is also another major advantage.
"I've been using the prepayment loophole for years". Says Denver homeowner,
Curtis Landau. "I've actually been able to remodel my home and pocket about
$25,000…all from the equity that was built so quickly."
Americans must understand this prepayment loophole isn't something lenders
are eager to share with their customers. If they did, they would risk taking a
huge cut in profits.
With over 50 million mortgages in force, it's estimated Americans overpay
their lenders in excess of $12 billion every year. It's no wonder this loophole
is kept
secret…lenders are undoubtedly getting rich off these interest
overpayments.
Written by Craig Romero
Hopefully I have given you some valuable information that will aid you in
your search for the best home loan suited to your needs. Good luck.
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