Consolidation is Your Final Exam

Student loan consolidation is tempting—especially when interest rates are low. Chances are you’ve already receive numerous offers from different lenders vying to get your loan consolidation business. However, it is imperative that you consider student loan consolidation a final exam of sorts.

As of today, student loans may only be consolidated one time. If you find yourself in a new consolidation that isn’t quite what you hoped for—you’re stuck. Take the time to investigate the interest rates, terms, and payment options before you take a plunge. After all, this is one final you can’t afford to fail.

Who Can Consolidate?

Anyone who has student loans can consolidate them. If you are married, and you’re spouse is also carrying student loan debt, you may also choose to consolidate your student loans together—merging your individual student loan debts into one.

While college graduates and students like to joke that student loans follow you “to the grave,” be aware that this saying is especially true for married couples who merge their student loan debt. Should one spouse die, the remaining one will be responsible for all student loan debt—not just his share. While most people don’t plan on dying, knowing the exact debt-load that the remaining spouse could afford can avoid making a sad situation even worse.

As with all loans, you must consider anything that can impact your ability to repay or your ability to acquire the loan in the first place. While consolidation loans tend to have less-stringent credit requirements, keeping your credit clean will ensure that you are eligible to consolidate your loans. In addition, higher credit scores can lower your interest rate, and save you thousands of dollars.

How Do I Consolidate?

If you have multiple student loans, then you already have the names and phone numbers of at least two potential student-loan consolidators. Check out the lenders you’re already using, as they may be likely to offer you a better deal if you—as an established customer—give them your business. Otherwise, most major banks offer student loan consolidation. All you have to do is call and ask.

Consolidating student loans is an easy and effective way to lower monthly payments and save thousands of dollars on interest. Taking time to learn about student loan consolidation can—and will—give you an A+ on your financial portfolio.

Get Your Credit in Order

Start by obtaining a credit report. Any one of your credit card companies will supply one for a small fee, or you can obtain one at myFICO or for free at Annual Credit Report (for U.S. residents only). Are there any outstanding bills that need to be paid? Pay them now to avoid slowing down your approval process. Remember, getting a mortgage is a lot like letting a stranger rifle through your financial underwear drawer. No matter how hard you try to hide missed or late payments, they will be found. Better to address them now than later. Otherwise, your mortgage interest rates may be higher. Worse yet, you could be turned down for a mortgage entirely.

Decide What You Can Afford

This is really easy to do, so take the time to decide what you can afford before you decide that the Cape Cod is the only home for you. If you’ve been looking online for homes, many real estate websites offer “mortgage calculators” to help you determine how a home will fit into your monthly budget based on down payment, current interest rates, and length of the loan. Also, you can visit lender websites or just call your local bank or real estate agent.

Find a Mortgage Lender

This can be tricky, but don’t be overwhelmed. Make sure that you obtain quotes from at least 3-5 lenders. Doing so will ensure that you get competitive interest rates and reasonable closing costs. Also, have lender itemize each fee so that you can compare apples to apples when you research other lenders. For example, if one lender charges a $350 origination fee and $200 for the appraisal, you can accurately compare it to another lender with an itemized list.

Get Pre-Approved

Don’t be lulled into sense of security of a lender says that you are “pre-qualified” for a mortgage. The only way to ensure that the percentage rates and closing costs quoted for your mortgage are accurate—and that you are indeed qualified—you must be pre-approved.

Go Shopping

Now that you have the peace of mind that comes with getting pre-approved for a loan amount in your price range, it’s time to have fun. Go shopping! If that Cape Cod still calls to you, then kiss your apartment manager good bye and pack up. You have your mortgage, now get your house!

FHA Title 1 Loans

The Federal Housing Administration (a part of the Department of Housing and Urban Development or HUD for short) provides principal mortgage insurance (PMI) for approved lenders offering home improvement loans. Most lenders refer to these as FHA title 1 loans. The advantage to these loans for the homeowner is that there are no equity requirements for owner occupied properties if the amount needed is under $15,000. So, even if you have only owned your home for a short while, you may be able to borrow money for materials, contractor fees, and architect and engineering costs associated with needed home improvements. Another advantage particularly for small repairs or do-it-yourself projects is that no security other than your signature is usually required for loans under $7,500. This means that your current mortgage or deed is not affected. Borrowers may also include the cost of building permits, title examination fees, and appraisal and inspection fees in the amount to be borrowed. Lenders will require certification that the work has been completed. If you are a good credit risk and qualify for one of these loans, they will usually carry the lowest interest rates and payments. Check with your current bank, credit union or mortgage company for more details and information.

Other Options

Some city and state governments have funds for emergency repairs for homeowners who do not qualify for other loans. Some offer very low interest rates for home improvement loans as part of neighborhood renewal or other programs. Some veterans and their families are eligible for certain home improvement loan programs offered by state or local Departments of Veterans affairs. Check with your city, state or even county government offices to see what if any plans they offer for homeowners in need of home improvements or repairs, before you borrow. A second mortgage may sound scary, but may actually be less expensive than a “home equity” loan or line of credit. Second mortgages general carry fixed interest rates and payment amounts. A home equity loan or line of credit may have variable interest rates and many have large final or balloon payments. Some borrowers have ended up have to borrow more money in order to pay off that balloon payment. So, as you should with any loan, shop around and compare fees to make sure that you are getting the best deal.

Can You Beat A Debt Collector?

If you want to beat the debt collectors then you will need to pay your outstanding bill. But there are also a few other things that you can do to stop the debt collectors from giving you an unwelcome visit. First of all when you get the letter confirming that your bill has been passed on then you can act right there and then. You can send a letter to the company explaining your problem and also you need to explain to them that you will be paying them back soon. If you cannot pay them back soon then do not make this promise. Otherwise they will not stop the debt collectors next time.

The Truth about Debt Collectors

You may not think this but debt collectors are usually very nice people. Obviously they may not seem so nice when they are banging on your door but once you start talking to them you will realize that they are human and they have a job to do. They will explain to you who has sent them and also how much you owe them. Then they will have one of two options that the debt collector will use. For example if they think that you will pay the bill now that you have had your little scare then they will give you a 5 day time limit to pay the outstanding bill. But if you are a repeat offender then it is very likely that they will start to repossess property from your home so that the bill can be paid off.

Debt collectors are the last resort that a business will take when they are seeking payment for a bill that has not been paid. The business does not want to send out the debt collectors. But if you cannot pay them on time then they will have to use the debt collectors.

Start at Home

Have you been please with the service of your first mortgage provider? Chances are the lender who approved your mortgage also offers second mortgage loans. If you already have a good working relationship with her lender, then you need look no further than your own home for a potential lender. Advantages of using your current lender are:
• History. You’ve established a payment history with your current lender that may help lower your interest rates and fees.
• Convenience. Depending on your lender, you may be able make both mortgage payments with one check.
• Familiarity. You already know how your current lender operates. If you like their way of handling business, then why leave?

Branch Out

Do you have a checking or saving account? Ask your local bank for information on second mortgages. Most banks offer a variety of loan products, and like customers who keep all of their financial business under one roof. Using a conventional lender offers you:
• Reliability. Large, well-known banks often have well-known reputations for reliability and customer service.
• Ease. Do you like having a real person to talk to when you need help? Get your second mortgage from a traditional bank and all you have to do is walk into your local branch for real human interaction.

Search Online

Today, online lenders have become viable contenders in today’s loan industry. Not only do they offer competitive rates, but they also offer the convenience of online applications and approvals. Borrowers looking for fast answers can often find out if they are approved for a second mortgage within 30 minutes. Online lenders can offer many benefits to potential borrowers:
• As mentioned, online banks can provide approvals within 30 minutes.
• Allow you to compare rates between a large number of lenders from your home computer.
• Often offer lower closing costs and fees.

Join a Club

They aren’t clubs, really. But credit unions offer members a great, secure way to apply for and receive second mortgage loans. Some benefits credit unions may offer are:
• Lower interest rates than banks.
• Lower fees and closing costs.
• More likely to approve someone with questionable credit history.

No matter what potential lenders you approach to handle to your second mortgage loan, remember that interviewing at least four lenders is the best way to ensure that you find the most competitive rates and terms available to you.

Build Equity

Generally, having more equity in your home will help lower your prospective interest rates.

Pay Your Bills on Time

Perhaps the best way to ensure that lenders offer you the lowest interest rates available is to maintain a positive payment history. Do you still have some overdue bills left to pay? Pay them now so that they aren’t left lingering on your credit report.

Check Your Credit Report

Okay, so you think you’ve paid your bills on time, but are you really sure? Periodically checking your credit will ensure that you haven’t overlooked any bills and that creditors haven’t made any mistakes when crediting your accounts. If you find an error on your report, address the issue immediately. If the creditor is at fault, request that creditor fix the problem and make note of it on your credit report. Did you find an unpaid bill that you forgot when you made your last move? Make a note of it on your credit report so that future lenders will understand why you were late making payments.

Take Your Time

If you have negative payment history on your credit report, consider putting getting your second mortgage for another year or two. Remember, the longer you go without any negative marks on your credit report, the more likely you are to receive better interest rates.

Shop Around

If you are ready to take out a second mortgage loan now, shop around. Get quotes from at least four lenders before making a final decision. Interest rates among lenders can vary significantly, so shopping around for the best rates can save you thousands of dollars.

Be Informed

You can’t know what a good interest rate is if you don’t know what the national interest rate is. Generally, banks post these on signs throughout the lobby. However, simply reading the real estate section will provide you with an accurate guide of current interest rates.

Do I Have to Get PMI?

If you put down less than 20% on the appraised value of the house, you must have PMI insurance to get a loan.

How Much Does PMI Cost?

PMI charges can vary based on the size of the loan and the amount of your down payment. However, most lenders usually charge up to 1% of the loan. For example, if you purchase a home for $100,000 and put 10% down (or $10,000), you will be charged 1% on $90,000—or about $900 a year.

How Long Do I Have to Keep PMI?

You must keep PMI until you own at least 20% equity in the appraised value of your home. After that, you may cancel your PMI. Be advised that, if your purchased your home before July 29,1999—or if your loan is VA or FHA—you must cancel PMI yourself. Lenders will not notify you when your PMI can be cancelled, nor will they automatically do it for you.

No matter what type of loan you have, or when you purchased your home, make sure to ask your lender when you will be eligible to cancel PMI so that you won’t forget. In addition, remember that lenders will only automatically terminate your PMI after you’ve reached 22% equity in your home. That’s two percent more than you need. If you want your PMI cancelled right at 20%–saving you unnecessary PMI payments—you must track your equity yourself and cancel when appropriate.

Do you have a bad payment history on your mortgage or a lien against your property? You may have to wait even longer to cancel your PMI. Remember, PMI is insurance to the lender that you won’t default on the loan. If your payments are late or there is a judgment against the property, lenders aren’t going to risk giving up the insurance.

How Do I Cancel PMI?

Once you’re eligible to cancel PMI, all that’s needed is a simple phone call to your lender. If you want—or your lender requires—you can follow up with a certified letter.

Knowing what PMI is—and when you can cancel it—can be almost as important as knowing how much your mortgage payment is. With annual PMI charges costing up to 1% of your loan, forgetting to cancel PMI on time can add up to hundred or thousands of wasted dollars. PMI may be protecting the lender, but it’s costing you.

Determine Your Goals

Decide what you want to accomplish by refinancing your mortgage. Doing so will help determine how you want to refinance—and with whom. For example, if your goal is simply to lower payments, finding lower interest rates and a long term (30 years) may be your only concern. If cashing out equity to consolidate debt is your primary concern, then your focus may be more on immediate or early pay-off—rather than long-term interest rates.

Make Sure Refinancing is Right for You

If your goal is to lower your interest rate and monthly payments, refinancing at a lower interest rate may be a good idea. However, don’t forget all of the “incidentals” that go into refinancing. Appraisal fees, closing costs, and early payoff penalties on your existing mortgage may offset monthly savings enough to change your mind. If you plan on moving soon, fronting thousands of dollars in fees to save $100 a month probably isn’t worth it. No matter what your goals, sit down with a calculator and determine if refinancing is really in your best interest.

Shop Around

Now that you’ve decided to refinance, you can begin looking for a mortgage lender. If you’re looking for the lowest interest rates, remember that interest rates can fluctuate significantly from bank to bank. In addition, various origination fees, closing costs, and loan terms may contradict with your financial goals.

Check out at least three lenders to ensure that you find the best rates and terms for you. Make sure that you compare similar mortgages so that you can accurately make comparisons between lenders. For example, don’t tell one lender that you are looking for a 30-year mortgage and then ask for the rates for a 15-year mortgage from another.

Be Prepared

Don’t think that refinancing is any less of a detail-oriented process than obtaining your initial mortgage was. Being prepared will help speed up the loan process and help minimize frustration. Your lender will most likely require the following documentation:

* Current pay stubs for one month
* W-2’s for the prior two years
* Bank and investment account statements for the last 2-3 months

Choose a Lender

Now that you’ve prepared and have found a lender that helps meet your financial goals, let your lender take care of the rest. The groundwork is laid, now it’s time to reap the financial benefits of refinancing your mortgage. Saving money on monthly payments, enjoying lower interest rates, and consolidating debt are just a few perks of refinancing your mortgage. Peace of mind, however, is the real payoff.

Where do I go?

Don’t be afraid to start with three or four “normal” lenders. If can’t get approved—or find their rates too high—then it’s time to consult with some “sub-prime” lenders. Sub-prime lenders specialize in taking on higher-risk loans, and will be more likely to work with you.

Now what?

Don’t think that you should be grateful to anyone who offers you a loan in spite of your bad credit. Just as you would normally compare the interest rates, terms, and closing costs of any normal lender, make sure and do the same with sub-prime lenders. Don’t choose a lender until after you compare the rates of at least three lenders! Remember, you aren’t going to really know if you’re getting a good interest rate unless you shop around.

Be cautious.

It’s sad, but some unscrupulous lenders prey on borrowers with bad credit. It’s up to you to ensure that you don’t become a victim. Did the lender only ask you to provide a social security number and your income level? If so, then move on. Remember, having bad credit doesn’t make the process of getting a loan much different than it would normally. Put simply, if something seems too good to be true, it probably is.

Also, make sure to look for any unnecessary fees or costs that lenders may tack on to your loan. Do they seem fishy? Request a detailed itemization of any additional costs and fees so that pushy loan officers don’t confuse you.

Look ahead.

Your credit rating is constantly changing. The more of a positive payment history you accumulate, the better your score will be. Pay your mortgage on time and do your best to repair any other credit issues you may have so that you may improve your score.

Refinance!

Getting a bad-credit is a great way for people with questionable credit to purchase a home. However, you can always refinance your higher-interest loan for a better one when your credit improves.

With so many sub-prime lenders, it’s easier than ever before for those with bad credit to get a mortgage. And never has there been a better way for people with bad credit to reestablish their financial responsibilities.

Terms

One consideration is the “adjustment frequency”. The interest rate of an ARM may be adjusted monthly, yearly or at some other interval. It is important to ask the lender to define the specific adjustment frequency attached to this loan. In general the borrower would benefit more from a yearly interval, but that depends on another term. The “cap” is the limit placed on the amount the interest rate may be increased each adjustment period. The borrower benefits from a fairly long adjustment frequency and a fairly low cap, however the borrower must beware of “caps” on total monthly payments. An ARM which places a “cap” on the total monthly payment is called a “negative amortization loan” and while the monthly payment is kept low, interest may accumulate and be added to the principal. This can mean that after years of paying a monthly mortgage payment, the principal has increased beyond the initial amount borrowed.

Other Considerations

The “adjustment index” is the specific index that the interest rate of the ARM is tied to. Banks use different indexes, interest on certificates of deposit is one, and treasury bills are another. The borrower should find out exactly what index the offered ARM is linked to. The “margin” is the amount, expressed as a percentage, which is added to the “adjustment index” and equals the total amount that the interest rate may be adjusted per interval. For obvious reasons, it is important to compare the margins offered by different lenders. Finally, a borrower should compare the “ceiling” or the highest amount the interest rate may become, over the life of the loan.