Mortgage Rate News

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Many seniors are lamenting the hit taken to their retirement accounts and other investments. As a result, they are looking for a little extra cash to help them ride out this recession while not depleting the principal in investment accounts. One of the ways to do this is through a reverse mortgage. And, with conditions starting to improve a bit, some seniors can get a little more in terms of a reverse mortgage. Golden Gateway Financial offers this information in a recent press release:

New legislation temporarily increased the reverse mortgage limit available to homeowners in 2009 to $625,500. This means that many seniors can now extract even more equity from their home as cash in a reverse mortgage. At the same time, the latest S&P/Case-Shiller Home Prices Indices showed that home prices are once again beginning to climb. Together, these two factors have provided seniors with a short window in which they can potentially earn more from their available equity than before and more than they might be eligible for next year.

However, it is important to be careful when getting a reverse mortgage. Interest charges can be very high, as can other fees. It is also important to realize that when the house is sold, or if you no longer live in it as a primary residence, the loan has to be paid back — it is a mortgage, after all. This means that the proceeds of the sale must be used pay off the loan, or some other payment schedule must be arranged.

At any rate, before deciding on a reverse mortgage, it is important to consult with a trusted and knowledgeable advisor who can help you determine the best course of action for you. It may be that a reverse mortgage is just the thing — or you may be better served with some other financial product or service.

Many people are looking to use debt consolidation as a way to better manage debt or to lower overall payment amounts. However, not just anyone can consolidate debt. There are requirements to be met.

What kind of debt do you have?

Interestingly, Chris Bibey points out on the Bankruptcy & Foreclosures blog, you can’t usually consolidate secured debt. Car loans and home mortgage loans cannot be wrapped up with other loans. You have to consider the type of debt you have before you can get approved fro debt consolidation. Credit card debt and other unsecured debt — such as payday loans or medical bills — can usually be consolidated. However, there are other considerations when it comes to qualifying for debt consolidation.

Can you get a debt consolidation loan?

Right now, it is somewhat difficult to get a debt consolidation loan. It is possible to qualify for a loan, but you will need to make sure everything is in order, especially if you plan to use a second mortgage loan in order to secure your debt consolidation loan. Here the biggest concerns any lender will have when arranging debt consolidation loans:

• Home equity: This is important if you plan to secure your debt consolidation with a second mortgage loan. You have to have sufficient equity to be able to cash out and cover your other debts. This is difficult right now, since home values have fallen.
• Credit score: Even with sufficient equity, or if you try to consolidate without using a second mortgage loan, you still need to have a good credit score. Most lenders want to see at least a 680 before helping you with these types of loans.
• Debt-to-income ratio: Your lender will want to know that you can handle the payments. Many lenders are going back to an old rule of thumb that states that no more than 30% to 36% of your monthly income is taken up in making debt payments.

Before you apply for a debt consolidation loan, make sure that you double check your situation. You can even talk with a financial professional to get a true idea of your options.

One of the questions that I have been asked a lot lately is this one:

How likely am I to get a home equity loan?

As with most personal finance questions, it really does depend on your personal situation. And what a mortgage lender is willing to for you (which is increasingly less and less). But there are ways to get a shrewd idea of how likely you are to get approved for a home equity loan.

Mortgage lenders are wary of giving out risky loans again. Gone are the days when you could get a second home mortgage for 90% of your home’s equity. Some mortgage lenders, believing that the real estate market would just continue appreciating at a rapid rate, were offering home equity loan options that amounted to 125% of a home’s available equity.

New expectations for home equity loans

Mortgage lenders now expect a little more in terms of the people they lend money to now. Bad credit home equity loans are becoming scarcer as mortgage lenders want borrowers with less risky credit scores. Many lenders want a credit score of at least 650 (which is lower than what many mortgage lenders will accept for a first home mortgage loan).

Additionally, many mortgage lenders want to make sure there is plenty of equity in the home. With home values dropping, lenders want to make sure that the homes used for collateral aren’t going to suddenly take a nose dive and be worth less than you owe on the home.

Finally, mortgage lenders are becoming more prone to verify income. Many mortgage lenders, who used to fudge income numbers in the past, as well as let some documentation slide, are tightening up requirements.

So, if you have plenty of equity in your home, and if you have sufficient income and good credit, you are likely to get a home equity loan.

Tags: home equity loan, home equity, home mortgage loan, home equity second mortgage,
second mortgage, home values, reader question