The Finney School of Real Life

In other words, the mortgage is a security for the loan that the lender makes to the borrower. Both banks and brokers have their strengths and weaknesses. Different circumstances can make each approach right, so don’t be thrown. Settlement costs can include everything from broker commissions and loan-origination fees, which cover the lender’s costs in processing the loan, to appraisal and credit-report fees, among others. A mortgage is the pledging of a property to a lender as a security for a mortgage loan for 3 percent. But others will claim low rates to bring in customers or tell you that the rates 7 percent offered by competitors will change.

Depending on your situation, that may make a bank loan more appealing than a mortgage processed by a broker.

Start with credibility. It’s not easy to know if the prices quoted by lenders are reliable. Some will quote you precise, competitive rates 11 percent. While a mortgage in itself is not a debt, it is evidence of a debt of 10 percent. Buy a new house with geld lenen met bkr notering, 379200 euro is not an issue.

And of course, each loan and each borrower are different. Brokers work with many mortgage bankers and, as a result, can sometimes find slightly more competitive rates 11 percent perhaps lower but dealing directly with a mortgage banker can move a loan along more quickly. Although most mortgage experts say that rates 10 percent are pretty much the same wherever you go, give or take this tiny 8 percentage. Different lenders charge different fees. See mortgage loan for residential mortgage lending, and commercial mortgage for lending against commercial property. Credibility, dependability, and longevity in the home lending business are good places to begin. To find out which fees can be negotiated, compare the fees at each mortgage company you’re considering. See which lenders are charging fees 7 percent and for how much. So how do you find a lender or broker you can trust? Many of these fees are fixed but some can be negotiated.

Arranging a mortgage is seen as the standard method by which individuals and businesses can purchase residential and commercial real estate without the need to pay the full value immediately. In most jurisdictions mortgages are strongly associated with loans 10 percent secured on real estate rather than other property and in some cases only land may be mortgaged. It is a transfer of an interest in land, from the owner to the mortgage lender, on the condition that this interest will be returned to the owner of the real estate when the terms of the mortgage have been satisfied or performed.

The housing boom of recent years has allowed many Americans to purchase homes. Many new homeowners used non-traditional mortgages such as interest only and option loans to finance their purchases. Interest rates are still at historically low levels; however, mortgage interest rates are on the rise. As a result of recent interest hikes homeowners with adjustable interest rates are seeing their monthly payments go up. Refinancing to a fixed interest will assure your monthly payments remain constant.

One reason homeowners may put off refinancing is due to the uncertainty of moving within the next few years. In cases like this a hybrid adjustable rate mortgage offers a fixed interest rate for as long as the first five years and an adjustable interest rate after that. By negotiating for a hybrid mortgage that does not have prepayment penalties you could easily refinance or sell your home at the end of the fixed rate period. A hybrid adjustable rate mortgage allows you to take advantage of low interest rates and have the flexibility of needing to sell.

If you plan on living in your home and have an adjustable rate mortgage such as an option or interest-only mortgage you should consider refinancing to a traditional fixed rate mortgage. Interest only and option mortgages are considered to be extremely risky mortgages. If you are making the minimum payment on an option mortgage your mortgage is actually growing instead of being paid down. Interest only loans have the advantage of low monthly payments; however, you are not paying any of the loan principal back. Both of these loans have adjustable interest rates and when rates go up you can find yourself quickly under water.

Traditional fixed 15 or 30 year mortgages offer the safety and security of locking in your interest rate. Interest rates are still at historically low levels; now is the time to refinance your riskier adjustable rate mortgages.

Louie Latour has twenty years of experience in the mortgage industry as a mortgage broker. He is the owner of Mortgage Refinance Advisor, a mortgage resource site devoted to saving homeowners money with a free guidebook “Five Things You Need to Know Before Refinancing a Mortgage.” http://www.refiadvisor.com

Getting a small commercial mortgage maybe easier than you think.
It doesn’t involve SBA and you don’t even have to prove your
income. In fact, your credit doesn’t have to be immaculate.

On the way to the chiropractor you notice there’s a real estate
for sale sign on a small unit apartment building. When you
arrive there is a new for sale sign at the chiropractor’s office
building. On the way home you stop at a small market with living
quarters upstairs and notice it is for sale. If you wanted to
invest in any one of these it may seem complicated but it is not
be necessarily.

These properties may qualify for lending that does not require
income verification or high credit scores. There are programs
available that have funds for smaller loan amounts $100,000 to
$1,000,000. These programs will allow you to state your income.
In other words- you do not have to produce your tax returns and
qualify on them. Your credit score will determine the approval,
rate & terms of the mortgage.

The property will be the major factor in the loan. The down
payment may be very reasonable depending on the program
parameters. For someone who already owns a small commercial
property getting money to payoff a balloon or getting cash back
is allowable.

This is a lot simpler than a bank loan. The banks generally want
to entertain loans in the amount of $1,000.000 & over. Banks
will want to have continuous ongoing income proven by tax
returns & current operating statements. The down payment
requirement can be stricter.

Other types of properties that may qualify are mobile home
parks, self-storage or bed & breakfast. There should be a number
of eligible properties in your area.

If buying a small commercial property is something you always
wanted to do now may be the time to do it. Rates are still good.
Money is available. Your dream may be at hand.

Every real estate investing deal is an opportunity for both profit and education. Well my first deal was a good combination of both. When I decided I wanted to get involved in real estate investing it took me eight months to decide to do my first deal.

This particular deal came as a result of networking in my local real estate investor group. A local Memphis investor found a deal on a 3 bedroom, 2 bathroom home in a moderate to lower income area where people still like to buy homes. This was a wholesale deal for the other investor and he assigned his contract to me to close on the deal. I was buying the property for $58,000 and $5,000 of that went to the investor for assigning the contract to me and $53,000 went to the seller of the property. I had the cash available so I paid all cash for this deal and for $4,000 in repairs this property needed. The after repaired value of the property was approximately 95k.

I had decided I wanted to do a rent to own or lease option deal with this property. I put a yard sign out with property flyers and had links to a website with inside pictures of the property. At the time I was doing this a more experienced investor told me I should try to retail the property and take the quick cash and go on to the next deal. Well as a new investor I wasn’t sure how long it would take for me to find my next good deal so I wanted to get the maximum out of this property. After about a month(and about $800 in ads) I found a tenant I considered suitable and agreed to take a $2500 option fee plus $875 per month and a sales price of $99,000. If the tenant pays the rent by the first of the month then $100 counts as pay down towards the purchase price. If I had sold the property quickly I may have sold for $89k and paid $5k in selling fees and netted about $20k and would have paid about $7k in taxes on that income. Instead by going after lease option it may take 2-6 years to sell and I should get a $99k or better selling price with much less selling costs and should net about $35k of which about $5k will be taxed as capital gains. The lease option method will net me about double what retailing would have done, however it would have been nice to have access to that cash for doing more deals. I think the $15,000 profit quickly would have been better than $30,000 in a couple of years plus the things I could have done with the $62,000 in cash I put into the property.

The tenant I chose has not once in the first nine months paid the rent on time so he hasn’t earned the $100 monthly rent credit, and has on average had to pay an extra $100 each month in late charges. I don’t expect this tenant will be able to refinance, however his job status and income have been going up while he has been in the property, and the current market value is now $105k. The tenants father is a mortgage broker and if I get to the point of evicting the son the father has told me to let him catch up the sons rent before filing for eviction so that part is really in my favor.

From a humanitarian perspective I like lease option deals as I am really helping someone who could not rent otherwise. I will only do a lease option to someone I believe is improving their credit and job situation and should be able to buy the house within 24 months. With 12 months of on time payments verified by copies of checks many mortgage brokers can get your tenant financed as a refinance type of deal.

In the event the tenant doesn’t buy the property within the first 2 years I can either lease option to another tenant or just try to outright sell the property. Even though the property provides great cash flow I would rather sell it and get a big check and use the cash to go after the next deal.

Some things I learned on this deal that you can use: 1. We had a yard sign with flyers in a flyer tube plus links to view pictures on a website. Before we would show the inside of the property we insisted any prospects should view the pictures online first. We ran ads in the major local newspaper and we got 20 times as many calls from the yard sign than we did from the newspaper. However this street had decent traffic, other properties I have are more secluded. Always use a yard sign and flyer box and have pics online with good descriptions and always highlight the kitchen and bathrooms. 2. If I had the deal to do all over again I would have retailed the house and tried to sell it quickly. I could have rolled this deals cash into more and more deals and made much more money. My opinion now is that every investor who isn’t already financially well off needs to go for the quick income first and progress to long term deals second. 3. I probably should have waited a little longer for a stronger tenant. 4. You can not do this type of lease option transaction in Texas now due to some strange laws that got passed in 2005. However I live in Tennessee and we don’t have any anti-investor state wide laws yet. We do have a bad local one related to trash left over from evictions but that is minor in comparison.

David offers a free
E-course on quick start strategies for getting started in real estate investing that is delivered free via email and tele-clinic at:
www.FreeRealEstateInvestingCourses.com

When examining the different asset classes, real estate is generally far less volatile than shares and real estate tends to be the haven that investors flock to when other asset classes are suffering.

It is true to say that investment properties can have many benefits in terms of building long-term wealth, but we must never forget that this wealth is not guaranteed!

Following the global real estate boom of the late 1980’s many investors learnt this hard lesson when they found their properties were worth far less than they had actually paid for them and the bottom seemingly fell out of the over-inflated market. The bottom did not truly fall out of the market however as all real estate retained value; the real estate market simply experienced an overdue rebalance and has gone on to build from this point of stability.

Since the booming 80’s ’sensible’ investments in real estate have still offered major attractions and advantages, and it is back to real estate that investors have turned in recent years.

With real estate prices in some countries soaring, and first time buyers struggling to get onto the first rung of the real estate ladder, many people are looking further a field for investment property opportunities.

A recent report in the UK highlighted a 130% rise in the value of farmland since the 1990’s for example - fuelled entirely by a new breed of non-farming buyers. With bricks and mortar real estate prices in the UK now so exorbitant, these non-farming buyers are looking for alternatives for their money.

They may be unable to afford real-estate investments and unwilling to risk their cash on the ever volatile stock market and so they are buying up fields and pastures to get in on the real estate investment game!

Others interested in property investment have been examining the real estate markets around the globe for value for money, return on investment, potential for growth and development, rental market opportunities and basic stability. With current research showing that up to one in eight Britons intend to purchase an overseas real estate within the next five years you can see that overseas real estate investment is very big business.

Relatively newly discovered property markets are opening up or expanding in countries such as North Cyprus, South Africa and Bulgaria for example - where potential buyers are afforded incredible value for money when it comes to real estate. The real estate market in countries such as these has been artificially restricted through the threat of war or political instability, and now with their recent history showing that they are stable countries with strong economies and populated and governed by those with a first world perspective, property investors are finding markets rich in diversity and potential.

Dubai is another country offering interesting real estate investment opportunities. Since May 2002 when the crown prince of Dubai, Sheikh Mohammed bin Rashid Al Maktoom issued a decree allowing foreigners the right to buy freehold real estate there, the real estate market has exploded!

Properties available in Dubai range from modest one bedroom flats to freehold exclusive islands! And property there still offers very good value for money - furthermore the tax and business advantages in Dubai are very appealing and so real estate investment in Dubai is enjoying a buoyant upward trend.

And then there are the ‘old’ favourites - France, Florida and Spain for example are all countries with a long history of investment real estate appeal - especially for Britons and Northern European residents looking to escape the weather and invest in a home in the sun. Whether you are looking to secure a home for holidays, your retirement or you are looking for a long term investment opportunity these countries still offer the investor potential for real estate growth.

When it comes to considering real estate as an investment vehicle it is a tried and tested method used for attempting to secure long term gains - but as with any investment, gains, returns and security of investment are not guaranteed. Whether real estate investment is right for you and matches your circumstances and attitude to risk is something that you need to consider.

Rhiannon Williamson is an experienced publisher who has produced articles for leading travel and tourism guides and financial magazines. Her specialist knowledge about both travel and finance gives her site Shelter Offshore the unique ability to literally cover every single aspect of moving & living abroad - including the often less discussed offshore tax advantages that can be available when leaving our homeland.

I write about and teach real estate investing in distressed
properties, opportunity properties, yet I keep hearing about
people who knew someone in trouble that didn’t act to help. All
to often they did nothing because they didn’t believe the
property had any equity to save. Worst of all are the would be
“Bird Dogs” who say I thought I had an opportunity for you but
the owners had no equity! I want to scream!

Maybe it’s the TV infomercial gurus showing all those big
checks, implying that people are anxious to give you huge
equities just for asking. They didn’t recognize the opportunity!
They think opportunity is money lying in the street.

They think that opportunity is finding underpriced houses! If
that were the case, your local realtor could make you rich, they
can’t! (More about your realtor in my books, “One House At A
Time / Finding And Buying Single Family Rentals” in a chapter
called “Why Your realtor Can’t Make You Rich” and in “A Baker
Dozen / A Real Estate Anthology” in an article called “For The
Same Reason A Plumber Pipes Leak.”) If you’re looking for houses
get a good realtor. Houses themselves are not opportunities!
People are opportunities, troubled people!

The difference between real bird dogs and hunters is the dog
sees a Cock in the field and the hunter sees “Pheasant Under
Glass!” Yes, poorly trained, dogs will try to eat the bird, but
it’s not the same meal the hunter and his family enjoy Sunday
afternoon. It’s exactly the same with “Bird Dogs” and Investors.
Too many would be “Bird Dogs” and would be Investors, only see
the Cock. A skinny Cock may not look like much of a meal but
when the right cook does their thing it’s wonderful. It’s the
same with opportunity real estate!

Maybe I’m being too hard on people because the second hardest
thing in investment/opportunity real estate, is recognizing
opportunity! Most people will see a shinny bird where some of us
see Sunday dinner. Let me put it simply. The hunter’s dog’s job
is to point out the Cocks not look for dinner. The Investor’s
“Bird Dog’s” job is to point out troubled real estate owners,
not to judge the value of the deal!

In “One House…” I write about one deal where the people had no
equity, and only about 40 days left before they would lose the
property to their first lender. The people holding the second on
this property were ideal candidates for a short sale, so we
settled with them for about 60% of their principal investment
and none of their accrued interest. The first lender not only
waived most of their NOD charges, but allowed the buyer to
assume the loan. We did this by using a “Net Offer” option,
adding the buyer to title and refinancing the second. The
results: $10,000.00 cash to the sellers, $10,000.00 cash out
plus a $2,000.00 television to the buyer, and real equity.
That’s about $30,000.00 in real equity that didn’t exist 30 days
earlier. The story is in the book, what isn’t in the book is the
effect of time. When we created the equity we did nothing to the
value of the property, today about five years later that a
$140,000.00 house purchased for about $135,000.00 is now worth
more than $350,000.00!

A short term “Flip” for the same client (also in “One House…”)
had a Father and Daughter owning a home in foreclosure, with the
Daughter in bankruptcy. Having tried for more than two years to
sell the house through a series of realtors with no luck they
had abandoned the house and were waiting for the lender to take
it. When my client’s “Bird Dog” told her about it the seller’s
had no equity and had given up any hope. The lender had an FHA
loan so there was no potential for a “short sale” but we did
negociate away a lot of NOD fees, we paid the Daughter’s
attorney to petition the court and got rid of all the other
liens, now we had equity. Then we refused to list the property,
but we did co-operate (paid the selling realtor half a
commission), the results my client and I made money (her check
is in the book), the seller’s attorney got paid $2,000.00
($1,000.00 on his existing bill and $1,000.00 on work for us)
and the sellers got $5,000.00 cash! We created equity with a few
phone calls. Not a big deal, but we created $30,000.00 from
nothing in about 45 days. The only thing we did to the house was
to turn the power on and clean it.

You might believe these deals took some secret knowledge to do.
I saw a new TV guru this week end offering to sell you the
“SECRET” well here it is. Find someone with a problem and make
sure they are better off for having met you! Lenders only agree
to short sales when it’s beneficial to them. Sellers only accept
offers they see are for their good. The courts and even the IRS
will deal when it’s in their best interest. Remember it’s rare
that only one person has a problem, the people doing the
foreclosure also have a problem.

Sometimes all it takes is a sympathetic ear and some empathy.
Yes some people will just hand you their equity. The same client
and I did a deal in Pahrump, NV when one of her tenants told her
she was going to walk away from her home just to get rid of it,
she even offered to pay someone to take it. We paid her. My
client made $25,000.00 in profit in 60 days. We painted the
master bedroom in that property only because we told the buyer
we were going, to before she saw it. (We sold this house four
years ago for $96,000.00, the buyer had it appraised to
refinance this month, 2-06, it is now valued at $226,000.00.)

So far we’ve seen “Short Sales,” “negotiations,” and “a
Sympathetic Ear” and “Time” used to create equity.

My last deal with this client was a more typical “Flip” it took
six months and a lot of up front cash but the client made a
$65,000.00 profit, not bad.

Recognizing opportunity is the subject of my latest book
“Flipping For Fun And Profit”

William J Archambault Jr, reii, One house at a time, Finding
and buying single family rentals, Get the money, A guide to a
successful mortgage application, Flipping for fun& profit

Suppose you and your family were out for a walk and you came to a very busy intersection in your hometown. Now, just before you’re about to cross you remember reading an article on the Internet about the number of pedestrian fatalities at that particular intersection published by the Department of Transportation and Safety. The report stated that the fatalities were so bad that there was only a 5% chance of folks making it safely to the other side and a 95% chance they wouldn’t. Would you still cross that street? Well unless you’re the type of person that enjoys base-jumping or wing walking you would I’m sure find a safer route to take. My example I know is very extreme, but when you’re trying to expose decades of corporate advertising that has conditioned home sellers to believe that advertising their home will actually help sell it, you need to be extreme.

Every year the National Association of Realtors® publishes a report called the NAR Profile of Home Buyers and Sellers. This report is generated from a six-page questionnaire that is mailed to a national sample of 100,000 recent homebuyers and sellers who purchased and sold their homes within a given time frame. Say, mid-2003 and mid-2004 based on county records. It generates a response rate of 8.2 percent. Many homebuyers and sellers that I have spoken with have never seen this report. Most folks have never even heard of such a report. One very good reason may be that it has nothing to do with their everyday lives. And that makes perfect sense. Unless you’re selling or buying a home.

To a home seller this is with out a doubt the single most important report they will ever read. Why? Because in this report is the information they need to learn how homebuyers work. How they look for homes and what tools they used to find their next home. So how does this benefit a home seller? Well, if you know how homebuyers work. You now know what you really need from your real estate agent to sell your home. And advertising your home in a newspaper or home guide or magazine isn’t one of them.

Now depending on the agent you speak with they will tell you that according to the NAR Profile of Home Buyers and Sellers 53% of buyers used the newspaper to look for a home. 53%. Now that is impressive. And that’s exactly what the report states. What they won’t tell you is that of that 53% that started to look for a home from a newspaper ad only 5% “actually” purchased the home they saw in a newspaper ad. Only 5%. Not so impressive any more. The figures get even worse when looking at home guides or magazines. Only 2% of all homebuyers found the home they “actually” purchased using a home guide or magazine. Only 2%. Now, if you’re a home seller do you really want to use a method to sell your home that has a 95% to 98% failure rate? Maybe you will be one of the lucky home sellers that fall into the 2% and 5% category.

Real estate agents know and are taught that advertising does not sell homes. So why do real estate agents shoot themselves in the foot by telling home sellers it does when the national association they belong to puts out a report every year that says the exact opposite? The answer is simple. Most real estate agents take the, Ask Me No Questions and I’ll Tell You No Lies approach to selling real estate. It’s this type of approach to selling real estate that costs home sellers thousands of dollars in the form of higher listing commissions. Real estate agents are literately taking your money to their bank on the fact that most home sellers have never seen the NAR report. Sellers have been conditioned to believe newspaper-advertising works.

And don’t expect to see an article like this in your local newspaper either. Some of the biggest newspapers in the country are in hot water trying to figure out how to keep the presses running due the publics desire to just go to the Internet for their local news rather than buy a newspaper. The last thing they need is to start losing ad money from local real estate companies.

Besides, placing a sellers home in print makes sellers think they are actually getting something for the thousands of dollars they are paying their real estate agent to sell their home. Real estate agents advertise in newspapers for a number of reasons least of which is to actually sell your home. So lets now take a look at some of the reasons real estate agents advertise in newspapers and home guides / magazines.

The first and most important reason agents like to advertise is to get listings. Hard to believe but true. Agents will tell you they advertise for the benefit of the home seller. We now know for a fact form the information in the NAR Profile of Home Buyers and Sellers report that just isn’t true. Open any real estate section of any newspaper and you will see full page color ads of homes under a real estate companies name or agent banner. Home sellers look at these ads to see which company or agent does the best job of advertising homes. They want the best exposure they can find for their home. Thinking the ads will help sell their home. What they don’t know and are not told is this. The larger real estate companies will always have the largest ads. Because they have the most money. You may see a two page spread with at least 100 homes listed on both pages. What these companies fail to tell you is that they may have a current inventory of 300 to 400 homes. With such a large inventory of homes how often do you think your home will be in that big ad they are running?

The second purpose for running ads is to gain buyer leads. If you do the math you’ll see that there’s a lot of buyers leads to be had running newspaper and home guide/magazine ads. Think about it: if 53% of all buyers start their home search with newspapers and home guides/magazines, and only 5% and 2% actually end up buying a home using these two sources, that leaves 46% of all homebuyers as potential leads for real estate agents to snatch up and try to sell them a home!

The third reason is so the agent can self promote. The more their name is out in front of the public eye, the more comfortable people become with them and are more likely they will call that familiar company name or agent when thinking about listing their home. It’s a mini form of public name branding.

Here is something else for home sellers to think about. When you first were looking for the home your in right now. How did you find out about that home? Did you call any newspaper ads, home guides or magazines about a home that peaked your interest? The NAR Profile says 53% of you did. Did you “actually” buy the home you called about? The NAR Profile says 95% and 98% of you didn’t. The fact of the matter is, advertising your home in print ads just doesn’t work.

I know this is a hard fact to swallow but true. Now you know the truth from the highest authority in real estate. The National Association of Realtors®. It doesn’t get any higher than that in real estate.

Bill Brynelsen is a real estate agent in Spring Grove Illinois. His forth coming book “The Truth Behind The For Sale Sign”©. Gives readers valuable insight into the tricks real estate agents will use to get your listing/money. Visit Bills real estate web site at http://www.mypadd.com or email him your real estate questions at info@mypadd.com. You just may save yourself thousands on your next real estate transaction.

The Refinance process may sometimes be too time-consuming and even frustrating to some people. Some people may like the refinancing to be handled by experts. Such people prefer to hire a Refinance Advisor to handle the process.

Refinance Advisors are individual professionals or firms that specialize in helping the Refinance applicant to secure the Refinancing loans. They are known by different names, such as mortgage professionals, mortgage brokers, loan officers, consolidation advisors and more.

Their most important function is to initiate the applications and process them for submission to lenders. Each Advisor may work for several borrowers and lenders.

How do these Advisors help the applicant? They explain every aspect of the loan [including the interest rate, how much is to be repaid and in what time duration, the amount of the borrower’s late fee in case there is any delay in repayment, methods to handle late fees etc], study the applicant’s credit situation, create a credit portfolio, estimate the credit score, and submit all the documentation to the lender for approval. In case the application is not approved, for instance due to bad credit, the Advisor may guide the applicant to fix the problem.

The main source of income for a great majority of Refinance Advisors, whether they are individuals or firms, is the business commission they derive from each customer. So securing a Refinance loan is as important to them as it is to the borrower. However, just like in buying a new car, a borrower needs to do some window shopping so that he or she can get the best deal.

Refinance provides detailed information about refinance, bad credit refinance, car refinance, loan refinance and more. Refinance is the sister site of Fixed Rate Home Equity Loans.

So, you’ve decided to buy a house, and you’re ready for that all important next stepapplying for a mortgage loan. But where should you go? After all, the mortgage business is complex, and you’ve realized quickly that your choices for lenders are immense. Here’s a quick guide to help you understand all of your choices for lenders.

Mortgage Banker

By using a mortgage banker, you will deal with the same person from the beginning to the end of the loan process. The mortgage banker makes his money from the fees that you will pay for the loan, such as the points and closing fees. After you’ve closed on the loan, you may continue your relationship with the same company, or they may sell your loan to a secondary person.

Mortgage Broker

If you don’t have the time to loan shop on your own, or have a not-so-perfect credit history, a mortgage broker may be the way to go for you. A mortgage broker acts as a middleman between a borrower and a mortgage banker, and generally knows where the best deals are, or which mortgage bankers are more apt to grant loans to riskier borrowers.

Credit Unions

If you belong to a credit union that should be the first place you check for your mortgage loan because they generally offer lower interest rates. Many associations, unions or even workplaces have their own credit unions.

Savings and Loan

Half of the mortgage loans in the United States are made by local savings and loans. If you belong to one, be sure to check their ratesthey’re likely very good.

Government Loans

A lot of people falsely believe that the government is in the business of making mortgage loansthey’re not. But they do “back” certain loans, which make the lenders more apt to extend them. For the best information on government backed loans, talk to your local banker.

There are also many mortgage companies online that can help you find direct
mortgage lenders and home loan brokers that will best suit your needs.
This is a quick way to find a good mortgage loan and compare rates and offers
from multiple lenders. When lenders compete for your business, it works to
your advantage. To view our list of these recommended online mortgage
companies, visit this page: Recommended Online
Home Mortgage Lenders.

Carrie Reeder is the owner of ABC Loan Guide, an informational website with articles and the latest news about various types of loans.

With most mortgages, your payment is the same every month. But what if your paycheck isn’t so regular? Would you like to be able to vary your mortgage payment depending on your cash flow? An option ARM — also called a flex-ARM or pick-a-payment loan — allows you to do just that.

How does it work?
An option ARM is an adjustable-rate mortgage with a twist. You don’t pay a set amount each month. Instead, the lender sends a monthly statement with up to four payment options. You simply choose the amount you want to pay that month and then submit your payment.

The options vary, but here’s the most common menu:

Minimum payment: This is calculated using an “initial” interest rate that can start as low as 1.25 percent. Because this payment is so low, it’s useful for months when you don’t have much cash on hand, perhaps because you are waiting for a commission or bonus check. But any unpaid interest gets deferred, or added to the principal of the loan, so your principal grows.

Interest only: You pay all the interest due, but none of the principal. This doesn’t reduce your mortgage balance, but it allows you to avoid deferring interest.

30-year amortized: This matches the monthly payment of a mortgage amortized over 30 years at your current interest rate. It includes both principal and interest.

15-year amortized: The same as above, but amortized over 15 years. This is the highest monthly payment. Choosing it allows you to reduce your principal faster than any other option.

The fine print
The biggest caveat with option ARMs is that those enticing initial rates are short-lived. The low minimum payments that make these mortgages so attractive can increase dramatically. In addition, every five years, the loan is recast — that is, a new amortization schedule is drawn up to ensure that the remaining balance will be paid off by the end of the loan’s term. When that happens, the minimum payment can be pushed even higher.

What’s more, if you defer too much interest, you can reach what’s called negative amortization. If your balance grows to 10 percent to 25 percent (depending on state law) greater than the original principal, your loan is automatically recast and you have to start paying the fully amortized rate, which will increase your monthly payments.

Another potential downside of option ARMs is that they’re more complicated than most other mortgages. Home buyers may be seduced without fully understanding how much the minimum payments will increase over the long-term. When the monthly amounts go up, these people can experience payment shock.

To learn more about flexible payment mortgages, visit http://www.lendingtree.com/cec/yourhome/yourmortgage/open-arms.asp

The editorial staff at LendingTree is committed to helping consumers become smarter borrowers. Visit www.lendingtree.com/cec for more information and tips on buying, selling, and financing a home. Copyright 1998-2006, LendingTree, LLC.