Money Advice Guide

In the past, mortgage rates were more or less constant with only minor variations from time to time. Depending upon one’s relation with the Bank, one could even avoid any minor increase in the mortgage rate.

However, with the Banks becoming multinational and the local Bank Manager having to be answerable to a Chief Financial Officer located across the seven seas, it has become difficult for the local mortgage loan officer to be able to offer concessions in the mortgage rate. He can, however, offer safeguards such as rate locks or lock-ins.

As soon as a favorable mortgage rate is announced in the market, the loan officer can secure the rate for you.

The lock-in may include both the mortgage rate and the points (one point equals 1% of mortgage amount charged by the lender) or just the interest rate–with the points allowed to rise and fall (float).

The Process

The mortgage rate and the points have to be locked before settlement or the closing, although they may be allowed to float until sometime after the application has been completed. It is always prudent to get the lock-in agreement in writing.

All documents such as pay stubs; w-2 forms or other proof of employment and salary; bank account numbers, your latest bank statement, and your bank branch address; all loan and credit card account numbers, and the names and addresses of your creditors; and evidence such as canceled checks of your mortgage or rental payments, have to be provided to the lender within a week, when a mortgage loan officer locks in a mortgage loan.

The validity of the locks may vary from 10 days to 120 days with small increments in the mortgage rates from the shortest to the longest period. When the mortgage loan has already been approved, the lock period would be the smallest, usually 10 days. When your loan has been taken up for processing and the mortgage loan officer has all the information, the lock may be for 30 to 45 days. If there are external factors which may delay the mortgage loan closing, the lock period could be longer than 30 to 45 days. This could be due to the need to sell an existing home before the new loan can facilitate purchase of another house, or due to the delay in construction of the new house.

Seize The Opportunity

Since greater cost in rates and points is involved in long lock periods, it is essential to keep track of the mortgage rates in the market. If the market is going down, it is better not to go in for a lock-in. You have to decide for yourself if mortgage rates are changing fast enough to warrant a lock-in mortgage rate or not as also the lock-in period. Locks longer than 30 or 45 days are usually used when there are external factors that may delay the mortgage loan closing. These may involve the need to sell an existing home before the new loan can close on the purchase of another home.

On the other hand, they may include a delay in the completion of a new home that is under construction. Since long locks begin to involve greater costs in rates or points, the longer the lock that is contemplated, one should take a hard look at the market, at whether mortgage rates are remaining rather steady or are going up or down.

If the market is declining, you may decide not to ask for a lock-in.

Tags: banks, chief financial officer, locking interest rate, monthly payments, mortgage ratebanks, chief financial officer, locking interest rate, monthly payments, mortgage rate

Share This

Many people use credit as a way to make purchases, cover their basis in an emergency, and take family vacations. This of course is ok, but when the debt gets completely out of hand is when one has to be careful and begin to analyze the financial situation. Many people get in over their heads and can not pay back all the credit that they have begin given by creditors. Payments begin to default and the creditors start calling to see why is it that you are not making payments towards the principal amount.

Hard times fall on all people, and you can always use some advice when it comes to your finances. If debt becomes a problem and you begin to get those phone calls from collection agencies, it is time to start changing some things with your finances.

Following are three ways that you can help yourself and begin to consolidate your debt. Many times it just takes a little self discipline and some good advice to get your self out of financial disaster. More importantly, learning how to manage your finances for the long term is the key to financial success. Use these tips to help you make the first steps towards debt consolidation and a clear financial future.

1. Develop a Budget

Developing a budget is the first step toward taking control of your financial situation. A budget requires first to assess you total income from all your sources and total expenses. You can start by determining your fixed expenses that occur every month, such as mortgage payments or rent, car payments, and insurance premiums. You then would want to determine your varying expenses, such as entertainment, recreation, and clothing.

Writing down every expense, even those that seem insignificant such as a latte or sandwich, is a helpful way to track your spending patterns, identify necessary expenses, and prioritize the rest. By doing this, you should be able to see how much you can really afford, without using credit. All your basic needs should be taken care of such as food, housing, insurance and health care.

Check your local library or bookstore to find books that can assist you in financial management. You may find helpful computer software that can help you keep your money organized.

2. Contacting Your Creditors

If you are having trouble making your monthly payments, contact the creditors and let them know what is going on. Don’t ever let a letter or phone call from a creditor go unnoticed. This can make it seem like you are avoiding the responsibility, and they may be less likely to work with you. Very often you can renegotiate terms and make payments more manageable so that you are not defaulting on payments. Address the issue quickly so that your account does not go to debt collectors. If you take responsibility for your payments, creditors may work with you so that you are still working to pay off the debt, but just in a more manageable fashion.

3. Managing Your Auto and Home Loans

Always manage your auto and home loans to avoid major problems. Many automobile financing agreements allow a creditor to repossess the car if your payments are in default. If you allow your car to get repossessed, then you may have to pay off the loan, as well as pay for the towing and storage costs, amounting to hundreds of dollars. Your car may even be sold by the creditor.

If you are in fear of default, sell your car or speak to the creditor about your situation. Avoid getting your car repossessed so that your credit report does not get a bad mark on it.

The same goes for your mortgage loan. If you fall behind, contact the lender immediately and see if they can reduce or suspend the payments temporarily until you can get back on your feet. You may have to pay additional costs after you resume payments, so be sure you know how much more before you make this decision.

Controlling your debt is a great way to build your credit and make steps toward having a clear financial situation. Try these things first, and see if you can’t pay back your debt if you are more organized and disciplined. You can entertain debt consolidation and employ the services of a financial advisor to help you further.

John R Blakefield is a mortgage and real estate specialist. For more information, articles, news, tools and valuable resources on home mortgages or investment loans, refinancing, debt solutions, visit this site: http://www.scourtheweb.com/mortgage/.

Tags: auto loan, debt, debt consolidation, home loan, mortgage, mortgage rateauto loan, debt, debt consolidation, home loan, mortgage, mortgage rate

Share This