Bailout Breakdown
I have had several questions from friends and family members in the last few days on what the status of lending has become and where it is going. Most are worried that the failure of the Governement to concede the passing of a 700 billion dollar wallstreet bailout. There isn’t a “freeze” per se but most lenders this week have been asking for 720 credit scores, 20% down, and your first born child. The credit crisis has banks less willing to lend money to each other, which ultimately means it will be harder for borrowers to get the credit they need. But that doesn’t mean it’s impossible to borrow money for those in good credit standing. From a consumer standpoint, credit hasn’t been frozen says Texas Home Loans advisor Shon Lorg with Lonestarfinancing.com. “If you’re somebody with excellent credit, you’re in a good position to borrow money.”
The thing to remember at this time is that standards are back and now higher than ever with mediocre interest rates. Lenders are no longer lending money on stated income and poor or even good credit scores are not under to qualify under most lending criteria. That means that the first step in the borrowing process is making sure your credit report is squeaky clean and your credit score is a minimum of 680 and preferrably 720. You can get a credit report for at freecreditreport.com or annualcreditreport.com for approximately $16.00.
Eventually the bailout will go back through the house and ultimately it will be passed. It may not be in it’s entire original form or be any where near $700 Billion dollars but a traunch of the bill will be approved to tampen down the fears of wallstreet. Consumer confidence must be strengthened to ensure mass panic doesn’t insue and employment tumbles. The big bailout won’t prevent recession, according to many economists, so consumers who don’t have emergency funds and worry about their job security should think thrice before taking on new obligations. so when does a home equity or new loan make sense? A new loan makes a lot of sense for someone seeking to refinance a bad loan, buy their first house at a nice price, or get that fuel-efficient car they’ve been planning on for a while. And though interest rates have moved up slightly during the recent tumultuous weeks in the market, today’s rates may seem low compared to what they are predictted to look like in the future. Most economists are predicting interest rates to gradually start climbing and possible hitting a pinnacle in 24 months at an estimated 8% or higher.
Still not sure if the time is right for you? Whether it’s a home or auto loan, here’s how to find that cash now. Mortgages Conventional borrowers seeking less than $417,000 )Fannie Mae/Freddie Mac limit) in most housing markets—will not have trouble finding loans. Expect to pony up a down payment of at least 5 percent (20 is better) and prove that you can cover all of your monthly debt payments with about 40 percent of your pre-tax income. Big borrowers and commerical loans is where most borrowers will run into problems in the coming months. In short the market needs to correct itself and this will either take two years or five years depending on how much governement intervention this is in the coming years.
Now big borrowers will have a much tougher time. Rates on jumbo loans—those above the conventional level—are running more than a percentage point higher than the smaller loans, according to bankrate.com. If you’re looking for a big mortgage, make the rounds of the local lenders, but check with a local mortgage broker and a large national broker, such as eloan.com, too.
One group of borrowers has a particular impetus to move fast: In the most expensive housing markets, such as Texas , New York and many California cities, they can get conventional mortgages as high as $700,000, but that limit will drop to $625,500 on Jan. 1. Texas mortgage refinancing rates now 1.5% higher than 12 months ago. That means someone in one of those places looking to borrow more than $625,500 will pay a higher rate, and having a harder time finding a lender after the New Year.
And as far as automobile loans, forget about it. The car companies are in trouble, but would rather discount the car than the loan to buy it. That makes third-party lenders—again, the local small bank and the credit union—the place to shop for those loans. Line up a no-obligation loan before you go to the dealer, suggests Stephen Schooff of Capital One, whose capitaloneautofinance.com is one of the largest car lenders. It’s tightening its credit standards, but still offers a “blank check” auto loan to solid borrowers with rates as low as 5.5 percent now. You can take that check to the dealer and negotiate like a cash buyer.
Home Equity loans are still a great credit option for those with good or excellent credit. If you’ve already got a home equity line of credit (HELOC), that’s also a good place to borrow money for your next car or home improvement. Rates now average below 5.5 percent, according to Bankrate, and there’s a good chance that interest is tax deductible. Before maxing out your home equity line, check to make sure that it doesn’t put your total home-backed borrowing near or over the current value of your house, because lenders have been dialing back those credit lines.
Alternative Sources and privatization of lending may start slowing hitting the markets even as soon as the next few months. But that is a whole new blog.
September 30th, 2008 at 3:45 pm
News! You Can Refinance and Consolidate Your Debt Again
If you want to refinance your home and consolidate debt, now it’s the time. A group of private investors in los angeles California loan money to homeowners and real estate investors. These private investors also called hard money lenders are the bank.
Many of you tried to refinance with your local bank or a mortgage company in your area, but with no success. Now it’s possible again, but you have to know the conditions to qualify. You don’t need excellent credit score or great income documentation, but you do need a lot of equity in your property.
Hard money lenders have been around for a long time, but no body ever heard about them. Real estate investors and brokers were working with them for years, but homeowners didn’t know they exist. Today for many of us hard money lenders are the only hope to get a real estate mortgage.
Where can you find a hard money lender?
Many mortgage brokers and real estate agents are already in contact with one or two investors because of the fact that they just need them. If you will go online and look for a hard money lender, you will probably find a 100 private investors or more. You don’t need to get fanatic about it, you just need to know what they’re talking about.
How do you know who is the right investor for you?
Normally of course you need to go with gut feeling, but in this case you need to be a little more careful then that. There are many hard money lenders that you don’t want to work with. So what do you do? You ask questions. Here are some questions you will need to ask private investors when you call them:
1. The name of the company.
2. How long they’ve been in business.
3. Get some name of people they’ve worked with.
4. What are the interest rates they’re offering?
5. How many points they charge you.
6. Do they charge any due diligence fees, or any money upfront?
7. Are there any other fees included?
8. You want everything in writing from them, it’s very important.
You have to understand that you don’t deal with big corporations. Hard money lenders are individual like you and me, but they have few millions dollars in their bank account. They would love to help you as long as you offer your real estate as collateral.
October 3rd, 2008 at 11:17 am
Great blog! Continue like that!
October 3rd, 2008 at 5:08 pm
we’re all greatful for our huge goverment that tries to accommodate to everyone.. and in the end, ends up piling up more debt for this country…
-jason
October 14th, 2008 at 2:47 am
money merge was right! accommodating everyone is making more debt for this country. so why accommodate? let’s all just make it fair..
October 16th, 2008 at 12:31 am
This blog Is very informative , I am really pleased to post my comment on this blog . It helped me with ocean of knowledge so I really belive you will do much better in the future . Good job web master .
November 17th, 2008 at 2:02 pm
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Aubrey Clark
Aunica Media (directbanc.com)
Atlanta, Ga.
800-535-6077
December 18th, 2008 at 12:51 pm
Paying mortgage interest to banks, and investing retirement savings in mutual funds are two realities that we just seem to accept without question, because that’s the way it has always been. But who says it has to be that way? These are not laws of nature or biblical declarations carved in stone. They are simply rules, regulations and business practices we developed in other economic eras. There is no reason why they should not be reconsidered and changed if change is determined to be for the common good. Considering we are in the midst of worst financial and economic crisis since the great depression, we should be questioning whether the fundamentals that we blindly accept are still appropriate. (The 401(k) Mortgage concept does not suggest a 401(k) be used to pay off a mortgage…it suggests that a 401(k) be used to BUY a mortgage. There is a big difference). In other economic times, suggesting something as radical and revolutionary as the 401(k) Mortgage would quickly be vetoed by the influential banking lobby. It is unlikely that they would cooperate in promoting or implementing changes that in effect require them to give up a large portion of a traditional mainstay of profitability…namely the low-risk residential mortgage. Today as the financial community struggles for survival, their bargaining position has weakened significantly. By considering bold, yet logical alternatives to tradition, massive amounts of needed liquidity would be injected into the banking system as America’s mortgages are bought, or partially bought with wealth that already exists, while addressing the root cause of the crisis at the “Main Street” level. The price that banks would have to pay for that liquidity is forever handing over a large part of the retail mortgage sector to the honest hard working people of America.
As our leaders explore options to restore stability, promises to help Main Street are vague and unfulfilled, while trillions have already been given or promised to Wall Street. Is printing more money and pouring it into hastily conceived, loosely controlled, untested programs the only way out of the crisis? Recent reports to the House Committee on Financial Services would seem to suggest that these programs are not well defined or controlled, and may not be having the intended effect. While these programs may eventually help solve the crisis, the staggering sums of new money involved may also turn out be a breeding ground for corporate greed and an every-man-for-himself mentality. Conversely the 401(k) Mortgage is an easily understood concept that would directly benefit Main Street and Wall Street without increasing America’s debt. This completely new form of financial instrument would forever change the way Americans pay for their homes, and save for retirement; activities that our banks and mutual fund managers have monopolized and profited from for years. If the government can pass legislation within a matter of days to authorize a $700 Billion rescue package, surely it is possible to change existing rules that define eligible investments for the 401(k) as well as any other rule changes necessary to enable the 401(k) Mortgage.
The time for a radical, revolutionary change is now.
For a detailed explanation go to http://www.the401kmortgage.com
January 15th, 2009 at 11:21 am
Hello
If you would like some mortgage monthly calcs you can use this tool, it can help you to get an idea of your monthly payments.
http://yourfinance.co.cc/mortgage_calculator.html
January 19th, 2009 at 1:03 pm
Hello All,
I just wanted to update everyone on a new feature just added to the website. Since mortgage rates are at an all time low, many of you may be thinking about refinancing or making a purchase. I’ve just added a mortgage loan calculator to the Rock Realty website.
Feel free to try it out & let me know how you like it.
http://www.RockRealtyWI.com/Calculators/Mortgage.html
Thanks!
————————————————-
Michael Collins
Broker
Rock Realty
Real Estate Exit Strategies
PO Box 2444
Janesville, WI 53547-2444
f: 877.774.ROCK (7625)
http://www.RockRealtyWI.com
January 22nd, 2009 at 10:47 am
Great blog. All great tips. I know this is several months old but it basically all holds true.
January 27th, 2009 at 2:04 am
The blog is Awesome! with lots of useful info. There is point in what Jason said. The Government is really trying hard to accommodate everyone..a herculean task.
February 7th, 2009 at 1:14 am
wow - well we just got another even bigger bail out
February 9th, 2009 at 11:29 am
nice info
April 3rd, 2009 at 12:53 am
Did the bailout already been materialized? I still don’t see any improvements.
April 9th, 2009 at 10:33 am
Excellent information. I’m trying to get a first time buyers loan myself, and found it to be a pretty daunting task. There was a lot I didnt know, that I wish i would have known. I’ve put together a site with what i’ve learned to help others, check it out if you have time
http://www.mortgagehelpinfo.com
April 14th, 2009 at 3:15 am
“Hi! Good post. I’ve noticed this new craze of John Beck’s program. I’ve also noticed that many people have purchased this system and using it. Even I bought his system and giving a try.
April 23rd, 2009 at 1:57 am
Although a loan does not start out as income to the borrower, it becomes income to the borrower if the borrower is discharged of indebtedness.
May 27th, 2009 at 1:27 pm
I wanted to contact you about your blog, LoanBark.com. I noticed that it hasn’t been updated since the middle of last year. I wanted to see if I might be able to write for it on occasion or maybe even buy it. I run a mortgage site called MortgageLoanPlace.com and I’ve done similar deals with other bloggers in the past. Do you think we might be able to work something like this out? Let me know what you think.
Thanks,
Brandon
September 7th, 2009 at 9:40 am
I agree with Thomas, blog is great! Good idea, just continue to update it with new and interesting content. The success is guaranteed.
December 8th, 2009 at 8:33 am
Interesting info on going direct to “hard money” lenders. I’ve read elsewhere that it can be a good option for some people, although the loan percentage of collateral can be lower than some other options.
thanks for the info.
TG