Mortgage Rate News

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Sometimes, it seems like we need something, and that a loan is the only way to get it. Before you decide to borrow, it is a good idea to think about whether you really need the money for something. You should also consider the type of loan you are getting. It might seem like a good idea at the time, but the end results could be scary. Here are 5 scary loans to try and avoid:

1. Interest only loans: These are mortgage loans that really are scary. And they were part of the issue in the recent mortgage market crash. You borrow money, but at first — for three, five or seven years — you only pay the interest on the loan. You aren’t making any headway on the principle. It seems like you can afford a bigger house, because the payments are so low. But once the initial term expires, and you have to start paying the principle, if you haven’t managed to refinance or seen an increase in income, things get really scary really fast. You could lose your house.
2. Car title/payday loans: These types of loans seem convenient when you’re strapped for cash, but the interest rates are high, and, in the cash of a car title loan, if you can’t repay, the car can repossessed.
3. Margin loans: These loans are used to buy stock. You can make a lot of money buying stocks margin, but you can also lose a great deal. The greater the leverage, the greater the risk.
4. Advance loans: Whether you are getting a credit card advance or an advance on your tax refund (a tax anticipation refund), the interest rates are high, and fees can be atrocious. Credit card advance loans can result in going over the limit (and getting more fees), and what happens if you don’t quite the tax refund you anticipated?
5. Co-signing: Co-signing on a loan can be scary, scary stuff. You agree to take on the obligation of the loan. This can be detrimental, since it can impact your credit if the person you are co-signing for doesn’t pay. And, of course, you don’t even get the benefits of using whatever it is you co-signed for.

Can you think of other scary loans that should be avoided?And, in honor of Halloween, a look at what Disney Villains have to say about money:

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It looks like the recession is over — at least technically. With Quarter 3 GDP numbers being reported today, it looks like the U.S. economy has moved from a period of loss into one of expansion. Economic data today was generally good, reports MarketWatch:

Along with improvements in key monthly figures on output and sales, the rise in real gross domestic product means the Great Recession is likely over in a technical sense, even as further job losses occur. A formal call on the end of the recession isn’t expected for months. …

“I anticipate that this is the turnaround, and that the numbers from here on out will be positive,” said Council of Economic Advisers Chairwoman Christina Romer in a televised interview.

Some are crediting economic stimulus measures for helping with the turnaround. It is important to note, though, that recovery is likely to be slow, and that for many individuals, a personal recession may continue for a while, since this economy is likely to see a “jobless recovery.”

Improving economy and buying a home

It also means that there is less of a chance of a double dip recession, or a return to another housing market dip. If this is the case, than it is quite likely that the housing bottom has already passed. If you have been waiting on buying  a home, it might be time to reconsider. It might be a good time to buy, while home prices are still low, mortgage rates are near record lows, and buyers have the upper hand.

In the end, an improving economy is likely to mean that some of the great opportunities and bargains that we are familiar with may not be available for much longer. It is true that the first time home buyer tax credit may be extended, but other than that, it is unlikely that all the great prices being seen right now will last.

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Right now, there are a lot of good deals to be had when it comes to buying a home. Home prices are low, and mortgage interest rates remain relatively low. And, it looks like Congress is getting serious about some sort of extension to the home buyer tax credit. It really is a great time to buy — if you can find the right deal. However, in the frenzy, it is important to slow down and evaluate whether or not you really are getting the best deal. Carolyn Warren wrote the book Homebuyers Beware: Who’s Ripping You Off Now? What You Must Know About the New Rules of Mortgage and Credit. Here are 5 things, shared in an email, that Warren points out about what you should know about home buying:

1. Some prices are too good to be true: 
   

   “That ultra-low price might be nothing more than a lure to bring in bids. Right now, many homebuyers are bidding on 5 to 10 bank-owned properties before they get a bite due to bidding wars and all-cash offers. If you want to avoid that type of stress, make an offer on a privately-owned property instead.”

2. Don’t think that “exclusive” always is: 
   

   “Realtors like to post signs saying a property is “exclusive” with them, but what that really means is that you cannot go to the home owner directly with your offer and that all offers need to go exclusively through the listing agent. That’s normal, whether the sign says “exclusive” or not. Naturally, you have the right to your own agent representation, and you should not forego that right. If you plunge into the home buying arena using the seller’s agent, you are setting yourself up to pay more.”

3. Use your own Realtor when buying new construction: 
   

   “Using the builder’s agent as your dual agent is like using your opponent’s attorney as your attorney, too. It’s folly!”
   

4. Avoid a “no points” mortgage:
   

   “Why would any sane person leave out points, which are income tax deductible, and then pay just as much in lender fees instead?”

5. Your bank may try a few tricks: 
   

   “Never sign anything or commit to a loan without first reviewing a Good Faith Estimate and getting your questions satisfactorily answered. (And by the way, if you ask what a certain odd-sounding fee is for and get a runaround answer such as, “Oh, that’s just standard,” then beware. You are probably being over-charged.)”