Article Sphere Logo

Planning Your Mortgage Strategy

By Expert Author: Raynor James Platinum Expert Author | Article Abstract
Word Count: 603 words | Views: 528 view(s)
Whether you are buying for the first time or the third, getting financing can be a stressful task. While most are happy to take practically any deal, you need to do some planning to avoid problems later on.

Getting financing can be stressful because doing so tends to play on our insecurities. At its core, you are asking someone to look at your financial life and pass judgment. On the positive side, you have held down a job for a number of years. On the negative side, you may not make as much as you would like. You also may have some credit problems such as missed payments that are very embarrassing. All of this can lead to a situation where you apply for and accept a mortgage that really is not in your best interest.

You hear it over and over. You are crazy if you do not buy a home. Real estate is the pillar of the great American Dream. If you own it, you will be building a nest egg of wealth as your equity grows through appreciation while at the same time you pay off the debt. Oh, and you get to deduct the interest you pay on that mortgage. It all sounds so great and it is so long as you don't get in over your head.

When applying for a mortgage, you need to have a firm grasp on your financial situation. You need to analyze it in this moment in time, but also need to focus on the future. As we are seeing now, a lot of people did not do this the past five years. They are now in trouble because they went with a mortgage that had a time bomb written into it. The bomb is now ticking down and a lot of people are in trouble.

So, what is the mistake people make with mortgage loans? They bet on a rosy future based on nothing other than a dream. The number one area this occurs with is the infamous balloon mortgage. A balloon mortgage works by giving you relatively low payments for a set period, such as five years. This lets you get into a home that you really can't afford with a normal loan. The time bomb with such a loan is that the entire amount comes due after the initial low payment period. Assume you take a balloon loan for $500,000 and make payments of $1,500 for the first five years. In year five, you suddenly are required to pay back the remaining balance, say $490,000. All of it. Immediately!

So, why would someone do this? Well, they have a rosy view of the future. They think the home will appreciate dramatically and they can sell it. Alternatively, they will refinance the loan to get around the problem. All of this assumes the market will not have a down period. If it does, such as now, they are deep trouble. They can't sell the home because the market is slow and they can't refinance because rates have risen and they can't qualify for a new loan given their finances. In such a situation, the only answers are to give the home back to the lender or face foreclosure. Neither is a good choice.

This scenario plays out over and over with a variety of loans. From interest only to hybrid loans, you must know what you are getting into and have an objective solution for how you will get out of them. As suggested by this article, this requires that you objectively plan for your mortgage needs now and in the future.
Raynor James

About the Author/Author Bio

Raynor James is with FSBOAmerica.org - free information on mortgage loans for home buyers.

Article Source: http://www.articlesphere.com/Article/Planning-Your-Mortgage-Strategy/68001

Article Submitted: 2007-01-20 | This Article has been viewed 528 times.

Rate Article

Related Videos

Loss Mitigation Plan Tax Consequences
Loss Mitigation Plan Credit Consequences
The Importance Of Paying Credit Cards
Learn about Mortgage Rates and Points
Home Loan Mortgage Choices for your Next Home
 

More "Mortgages Refinance" Related Articles

 
 

Listed below are more articles related to the above article from the "Mortgages Refinance" article category.

People interested in the above article "Planning Your Mortgage Strategy" are also interested in the related articles listed below:

 
The global financial crisis has left lots of borrowers out of luck when it comes to buying the commercial property that they need or want. As many as eighty percent fewer commercial property loans are now being written than than before. If you have been rejected by a lender and are looking for an alternative funding source to buy your commercial property, you should consider a private commercial mortgage lender.
If your past mistakes led you to foreclosure, you probably feel like the weight of the world is on your shoulders and that you may never qualify for a home mortgage again. The truth is that obtaining a home loan post foreclosure requires a bit of legwork, but can be accomplished. Thousands of current homeowners have been through a foreclosure before.
"Blessed are the young," says Herbert Hoover, "for they shall inherit the national debt." Debt, in whatever language or guise, is bad. But what if you've incurred debts and find it hard to dig yourself out of them? Does this mean you are forever disqualified from owning a home? Some would say yes. Bad credit loan mortgage rates show otherwise.
With the government now putting policies in place to stimulate the housing market, this could be a great time for potential home buyers to find the home they have been looking for. A mortgage broker can be a good choice in helping these buyers find the mortgage they seek.
You decide it's time to go shopping for a home mortgage. The instant this decision is made, a feeling of dread washes over you. The same old questions thump inside your brain. How do I compare home loan interest rates? How will I know a fair rate when I see one? The where, what, how and why of home financing will have you so mind boggled you will soon be tearing your hair out in despair.
With the commercial real estate market about to go into a crisis that may actually even be worse than the one experienced by the housing sector, it is easy to figure out the reasons why the bank regulators have urged the lenders to enhance their efforts in finding ways to approve a commercial mortgage modification for their property owners on the brink of foreclosure. The Federal Reserve, the Federal Deposit Insurance Corporation (FDIC), and other financial regulators are worried that the stability of the financial institutions could easily crumble with the onset of the upcoming wave of defaults by commercial property borrowers.
Financial analysts have been predicting that the commercial property sector will also undergo a crisis that might even be worse than the collapse experienced in the residential housing market. The increasing number of vacancies in commercial properties and the unchecked increase in the unemployment rate are harbingers of potential serious problems in this particular market.
 
Article Directory Home All Categories Finance Mortgages Refinance
 

Can't find what you're looking for? Try Google Search!
 
Copyright © 2005 - by Larry Lim, Singapore - Article Search Engine Directory at ArticleSphere.com™
All Rights Reserved Worldwide. All Trademarks and Servicemarks are the property of the respective owners.

Afrikaans Albanian Arabic Belarusian Bulgarian Catalan Chinese (Simplified) Chinese (Traditional) Croatian Czech Danish German English Estonian Filipino Finnish French Galician Greek Hebrew Hindi Hungarian Icelandic Indonesian Irish Italiano Japanese Korean Latvian Lithuanian Macedonian Malay Maltese Dutch Norwegian Persian Polish Portuguese Romanian Russian Serbian Slovak Slovenian Spanish Swahili Swedish Thai Turkish Ukrainian Vietnamese Welsh Yiddish