Home Loan Basics

Author: Peter Kenny

Owning a home is a dream that many people share. Understanding the basics is a good first step in homeownership. This article will explore a few of the fundamental issues concerning homeownership and the terms associated with the process.

The vast majority of people looking to buy their own homes have to rely on financial help. Generally, this financial help comes from banks or mortgage lenders. Some of the terminology these agencies use can be confusing. Let's look at some of them.

Mortgage: Mortgage is a term that you will hear over and over again as you move through the process of buying a home. In simple terms, a mortgage is a type of loan used to buy real property such a home or land. In essence, a bank or mortgage lender will loan you the money to make the purchase and they will hold the home or the land as security for the loan.

When you take the mortgage loan, the lender will hold the title to the property until the debt is paid off. If you cannot or do not make the required payments on the property, the lender may sell the property in order to recoup its money. This is known as foreclosure.

PITI: PITI stands for Principle, Interest, Taxes, and Insurance. This is a common term used during the home buying process.

Down Payment: As far as home loan basics are concerned, the down payment is the amount of money that you pay upfront. In a traditional sense, the down payment is money that you already have saved. The more of your own money that you can apply to the down payment the lower your payments will be. Conversely, if you make no down payment at all (or a very small one) the higher your monthly payments will be. A general rule of thumb is to have at least 3-5% of the cost of the home as a down payment.

Principal: The term principal is the total amount of money that you are borrowing from the lender. In other words, principal is the cost of the home or land, minus the down payment that you make.

Interest: Interest is the amount of money that you pay the lender for its services. This is above and beyond the principle amount. Interest is assigned as a percentage and it may come as either a fixed rate or a variable rate. The lower the interest rate on the loan, the less your payments will be.

Taxes: Many home shoppers do not realize the impact that taxes will have on their loan or the buying process in general. All home buyers are required to pay property taxes. The amount of the tax is often put into an escrow account where a third party will hold the money until the deal closes and the money is released to the taxing agency.

When considering buying a home make sure you take into account the various taxes that you will have to pay during the course of the year or at year's end. These taxes must be paid so ensure that you plan for them.

Insurance: Insurance is another obligation and payment that you will be required to take on when you buy your home. The lender will require a certain amount of insurance on the home, but you will probably want to add other types as well. For instance, if you live in a flood zone you will probably want flood insurance.

Closing Costs: Closing costs can vary from one lender to the next so make sure you understand what your lender is charging. In general, closing costs include loan origination fee, title search fees, discount points, survey fees, appraisal fee, title insurance, deed-recording fee, and credit report charges.

These are only a few of the home loan basics. Home shoppers can find much more information on the home buying process either online or through a reliable real estate agent.

Article Source: http://www.articlesbase.com/finance-articles/home-loan-basics-229374.html

About the Author

Peter Kenny is a writer for The Thrifty Scot, please visit us at Bad Credit Remortgage and Cheap Mortgage

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Home Loans – How to Avoid Swimming With Sharks!

Author: Tristan Dunston

Predatory home loan sharks are coming under increased pressure from consumer campaigners concerned at the number of Australians falling victim to rogue lenders.

It is feared the problem could get worse as interest rate hikes force struggling families to refinance their home loans. The need to keep a roof over their head could leave some families vulnerable to lenders operating on the fringes of the credit market.

Typically, predatory lenders target people in financial trouble, who have assets, such as a home, but little ability to repay a refinanced home loan. Often the sole intention of predatory lenders is to strip as much cash from their victim as possible by charging very high interest rates, excessive commissions and charges.

Cases of predatory lending are characterised by high levels of default. The Credit Ombudsman Service Limited has pointed out most predatory lending cases see borrowers default quickly, due to the high interest rates charged. Defaults sometimes occur as soon as the first month.

Often the tragic outcome for those who fall victim is the loss of their home and any equity they may have built up while repaying their home loan, causing real hardship for the families affected.

The issue has become so serious that a coalition of consumer groups and financial industry bodies has been set up to help raise awareness and to help tackle the problem. The coalition includes the Public Interest Law Clearing House, The Australian Banker’s Association, Legal Aid NSW, the Consumer Credit Legal Centre, Abacus and the Mortgage and Finance Association of Australia.

According to Australia’s Credit Ombudsman service, many victims of rogue lenders are vulnerable people who are less able to stand up for themselves. They are pre-dominantly people already in financial difficulties, Centrelink recipients, pensioners, non-English speakers or people with learning or mental health disabilities.

Rogue lenders get around consumer protection rules, such as the Uniform Consumer Credit Code, by structuring loans to fall outside of the credit code’s jurisdiction.

Two sad cases highlighted by the NSW Consumer Credit Legal Centre show just what can happen. An unemployed couple, with four children, contacted the consumer watchdog, after being stung by unscrupulous money men. The family had gone to a broker when their home was threatened with repossession by their lender. The couple, who had fallen into serious arrears on their original home loan, also needed to raise money to pay off debts, register their car and convert a garage into an extra bedroom for an expected fifth child. The broker, who had been informed of the couple’s income, set up two high interest loans, one at a whopping 23.6%. The broker was paid $15,000 dollars in fees and commission on top of the lender’s fees. The family ended up owing $65,000 more than their original home loan, with little hope of ever repaying the debt.

In another devastating case, a migrant couple, who had lived in Australia for 35 years, lost their home after going to a broker to refinance their home loan to repay debts incurred due to a family crisis. The couple in their 60s had been repaying their home loan for 25 years, but after the broker arranged three loans in a couple of years they found they were unable to meet their repayments.

Home owners facing financial hardship and considering refinancing their home loan can get free, independent financial advice. They can contact one of Australia’s state sponsored financial counsellors such as the Victoria state ‘Consumer Action Law Centre’, who are keen to help people avoid falling prey to the home loan sharks.

Article Source: http://www.articlesbase.com/loans-articles/home-loans-how-to-avoid-swimming-with-sharks-318350.html

About the Author

Tristan Dunston is an independent public relations consultant specialising in finance and privacy matters. He loves white water kayaking and photography.

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Credit Consolidation Or Debt Settlement?

Author: Adam Jasa

Which is right for you? That depends on many factors, mainly your current and projected financial situation. There are many misconceptions about these two options and in this article I will explain the positives and negatives of each.

Credit Consolidation is to combine outstanding debts into one or several loans. The important thing to remember is that with a consolidation you are not reducing the principal debt amount you owe. In most cases your principal debt will increase at first because of closing costs or transfer fees. A Credit Consolidation can be a good move but only if the new loan is at a lower interest rate than the individual debt items. Over the years I have advised hundreds of clients on how to get out of debt. It seems that initially most people want to consolidate their debts to not only reduce interest but to make their lives easier by making only one payment. I recommend that if you get approved for a consolidation loan to only accept if the interest rate is substantially lower than the loans you are consolidating. It makes no financial sense to consolidate loans to make your life easier. This is especially true if you refinance your mortgage to pay off credit cards. Remember, only consolidate for a lower interest rate and take all closing costs into consideration. Another potentially useful situation to consolidate is if you are struggling with minimum monthly payments. In some cases you can buy yourself some time if you're able to consolidate and have a substantially lower payment, although this will generally prolong the amount of time it takes to actually pay the debt off.

Debt Settlement is also known as Debt Reduction. Debt Settlement is different than Credit Consolidation because the goal is to reduce your principal debt amount. This is done through negotiating with your creditor to lower your debt amount based off your specific financial hardship. If you are not in a hardship the program will not work because the creditors will have no reason to lower your debt amount. What qualifies as a hardship? As always, this depends on your situation. Some people are already behind and can't afford their minimum monthly payments; this is definitely a financial hardship. If you're current but are in danger of falling behind in the near future, you also might qualify for Debt Settlement. Debt Settlement is usually the fastest way to get rid of unsecured debt besides bankruptcy. The main tradeoff is that it's not good for your credit score. If you have decent credit, your payment history will be negatively affected which is enough to pull your credit score down into the "poor" range. In order for Debt Settlement to make sense for you, the benefit of paying off your unsecured debt in less than three years must outweigh the fact that your credit score will be compromised. Once the debt is paid off you can begin to rebuild your credit.

Article Source: http://www.articlesbase.com/finance-articles/credit-consolidation-or-debt-settlement-434965.html

About the Author
Adam Jasa is the Founder of Select Debt Relief www.selectdebtrelief.com. Previously Adam worked with the Freedom Financial Network in their Financial Consulting Department. He is an expert in the different options available to consumers with unmanageable debt burdens. His company, Select Debt Relief is a member of Debt Resolution Partners which currently manages over $950 million of consumer debt.

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Debt Settlement Information - Making The Right Decision

Author: Hector Milla

If you are overwhelmed with debt and are unable to pay your bills, a solution to your financial problems can be debt settlement.

When struggling with finances, it can be very hard to make the right decision for yourself. In today's weakened economy, many people are considering and choosing debt settlement as their financial relief.

Aurora Lillo Editor of the "Best Debt Relief Programs" website -- http://www.BestDebtReliefPrograms.net -- pointed out;

“…Debt settlement allows you to consolidate all of your debt while at the same time reduce the total amount that you owe. Your debt is combined into one easy monthly payment. Your payments are negotiated to an amount that you can afford each month and calls and letters from credit collectors are stopped. A debt settlement plan gives you great relief on current outstanding debt…”

If you do not know where to turn to find financial relief, debt consolidation should be considered when trying to make the right financial decision. It is great if you have a few large amounts of debt that you are wanting to combine or if you are looking for financial assistance and guidance to help get you back in control again. With debt consolidation, you will learn what needs to be done to consolidate debt as well as learn what not to do in the future to find yourself in this situation again.

By choosing debt settlement you will:

~be free of debt within just a few years.
~be able to focus on rebuilding your credit.
~pay off debt at a lower amount.
~negotiate the impact of your credit score.
~avoid harassing collection agencies.
~avoid bankruptcy.
~have just one single payment each month for all combined debt.
~have all extra charges eliminated.
~avoid any lawsuits.

“…A debt settlement program can be the best decision for your problems, both financially and emotionally. Not only will you get yourself out of get, but collection calls and harassments will stop. Your debt will soon be paid off and you will be back to financial freedom…” added A. Lillo.

Further Information By Visiting; http://www.BestDebtReliefPrograms.net

Article Source: http://www.articlesbase.com/debt-consolidation-articles/debt-settlement-information-making-the-right-decision-1631388.html

About the Author

Hector Milla runs his corporate website at http://www.OpsRegs.com where you can see all his articles and press releases.

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What Is Debt Consolidation ?

Author: Rocky

Due to the economic crisis, majority of people have been forced to face serious financial situations. Due to their incomes reducing drastically, on account of job losses or business losses, they are finding it hard to keep up with the credit card payments, home loan payments, personal loans payments etc.

Their debt continues to increase day by day as they try to manage their debts by paying off either the interest amount / taking another loan to repay the previous one. In such a scenario, where a person is faced with a lot of debts originating from various sources, one can think of the option of Debt Consolidation.

In simple words, Debt Consolidation is a process involving taking out a single loan to pay off many other loans. Most of the times, it is done for the following reasons:-

-- To have only one loan to service. This reduces the tension on the part of the borrower as he needs to focus on repaying only one loan, instead of repaying a multitude of loans which he had earlier.

-- To secure lesser rate of interest as compared to what they have been paying for other loans

-- Debt consolidation is also considered for securing a fixed rate of interest on a single loan as opposed to paying variable interest rates on different loan amounts.

Although debt consolidation can entail consolidating various unsecured loans into another unsecured loan, but most of the time, the lenders prefer to have some sort of collateral.

If a person is troubled with a lot of unmanageable loans and can offer his own house as a collateral / security, then it can make the process of debt consolidation easier, as in this case the lender has to bear lower risk as a result he is in a better position to offer lower interest rates. This eventually benefits the borrower who is going in for Debt consolidation.

I would be further continuing on this topic in my upcoming articles……

I hope you have enjoyed reading this article. As always, comments are Welcome and Encouraged. Cheers..........

P.S. If you really enjoyed this post, then please consider helping us out and spreading the word. Thanks....

Article Source: http://www.articlesbase.com/debt-consolidation-articles/what-is-debt-consolidation--2058463.html

About the Author

Rocky is a Management Graduate, who is involved in travelling overseas for business development activities.

At present, He is involved into writing of Blogs discussing a variety of Topics

http://www.basicfinancialinfo.blogspot.com/

(For Basic Financial Information)

and

http://www.informationandideas.blogspot.com/

(For Business and Money Making ideas and Opportunities, Tips to earn and save money etc.)

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