Have you ever seen anyone helping you in the times of financial crisis? If anyone has really helped you then I must say that you are very lucky. I wish I could have a friend who would helped me in my financial crisis. Last weekend I was so down with my finances, had not a single penny in my pocket.All my money was spent on my sister's birthday celebration. At that time an idea came into my mind, that was, taking help of payday loan companies.
I wanted my car to get repaired badly and so I decided to call a payday loan company and ask for a loan from them. This is something really a very great idea, indeed the best one. The most important advantage of payday loan companies are that you get a cash loan approval within 24 hours and they instantly transfer money into your bank accounts.
No matter I had a bad credit history, the payday loan company was ready to help me in the best possible manner. Payday loans is basically a help to those who are facing the most challenging financial crisis of their life.
But as the coin have a other side, in the same manner payday loans have few disadvantages too. The only problem I faced was that it had a high interest rate and it was very difficult for me to manage payments without any monthly budgets. But now I have to think about repaying the payday loan as soon as possible so that I do not fall into any other kind of problem.
But I made sure that I have chosen the best payday loan company of my city. They are not at all harassing me to pay back their payments.
Mortgages can be categorized into various types in two different ways. To start with mortgages can be based on loan provider. As such there are two divisions - government and conventional loans. Second categorization is made based on type of interest rate - fixed or adjustable rate & their combinations.
a)Loan Provider
Government loans are like FHA and VA loans, Rural Housing Service Loan Programs and State & Local Housing Programs.
FHA Loans: Federal Housing Administration administers many loan programs and these are easier to qualify for compared to conventional loans. They have lower down payment requirements but have statutory limits, meaning the loan amount cannot be more than the set limit.
VA Loans: These are guaranteed by U.S. Dept. of Veterans Affairs. The veterans & service persons are able to get mortgage loans with suitable terms and usually without down payment requirement because of the VA guaranty.
RHS Loans: Rural Housing Service guarantees mortgages for rural residents without requirement of any down payment and minimal closing costs.
State & Local Housing Programs: In many states low to moderate housing finance programs, programs which are modeled specifically for first time buyers & down payment assistance programs are made available for borrowers. The advantage borrowers get is that these programs have lenient qualification guidelines & lower upfront fees.
Convention loans
These loans are further divided into two types; conforming and non-conforming.
Conforming loans have terms & conditions as set by Fannie Mae & Freddie Mac while non-conforming loans also called B/C loans are for borrowers who do not meet the credit requirements set by Fannie Mae & Freddie Mac. These loans are offered to borrowers who may have recently filed bankruptcy, had gone through foreclosure or have late payments on credit report.
b) Type of interest rate
Fixed rate mortgages
Fixed rate mortgage have fixed interest rates and monthly payments on the loan remain fixed for the full term of the loan. These loans are available for terms which can be 40, 30, 25, 20, 15 and 10 years.
Payments on these type of loans are calculated in a way that when the term of the loan ends the mortgage will get paid off in full and is also called as fully amortizing loan.
Adjustable Rate Mortgages
For adjustable/variable rate loans the interest rate as well as monthly payments change over the term of the loan. The interest rate adjusts according to changes that occur on an index on which the interest rate is based.
Hybrid Loans
These loans are combination of adjustable and fixed rate mortgages and have different variations:
Fixed period ARMs
Two-Step Mortgages
Convertible ARMs
Graduated Payment Mortgages
Buydown Mortgages
With so many loan options selecting the right type can become difficult. The right type mainly depends on how long a person plans on staying in the house & amount of monthly payments he can comfortably afford.
It was good to see that now million of borrowers will get help from Obama's New Loan Modification Program that aims to help them staying in their homes and avoiding foreclosure. Lots of borrowers are still confused that whether this step from the President would help them or not. People are confused that this new refinancing program is for whom? Lots of question still running in their mind. This post is for all those people who are still scratching their head regarding the broad decision made by President Obama.
What is the new Loan Modification Program all about ?
This plan was made keeping in mind two groups of people:
1. People who were unable to qualify for Refinancing though they were able to pay their mortgages on time. This was happening because they owe more on their current home than it was a worth of.
2. People who are at extreme risk level because of high foreclosure.
This new home affordable program plans to allocate around $75 billion for those borrowers so that they can stay in their homes without any added disturbances. The only thing to be kept in mind is that not everybody will qualify for this program. Then Who will Qualify?
1. A person should live in the same house which must be his/her primary residence. 2. Second Mortgages should not be included under this plan at any cost. 3. A person should prove his income. 4. The current house payment should be equal to or more than 31 % of a person's Gross Monthly Income. 5. There should be no charge to apply for free loan modification program.
How to apply for New Loan Modification Program?
The most important thing to do here is to complete the paper work as soon as possible and completing the required loan modification documents. Secondly, the borrower should prove that he/she is passing by financial crisis, they have to submit their income and expenses details completely.
Which banks are helping with this new Loan Modification Program?
It is good to see that the Federal Government is offering monetary incentives to the lenders because this program is entirely on the voluntary basis. As a result of this most banks will offer this plan to their qualified borrowers.
How will the new Affordable Plan work? With new interest rate and payment this program will run on 3 months trial period. If the payments are made on time the lenders will automatically convert the plan to permanent modification agreement. After this the plan will continue till 5 years at a very low interest rate and payments.
During this 5 year period homeowners will receive $ 1000 per year which is directly applied with the loan balance. As soon as the 5th year is completed the rate is bound to go up by 1% until it reaches to the maximum point which had been signed in the agreement. It is important for the homeowners to learn about their debt ratio.
What are the important features of new Loan Modification Program?
This new program is not at all similar to loans. The best part is government is paying incentives to the lenders who are participating in this program. Previously no new loan was written that was more than 80%, now with the drop of prices these changes are normal. Many people can easily take advantage of current low mortgage interest rates.
I am ending this post by stating that though I have provided my readers with information regarding qualification of new loan modification program, that doesn't mean that I am favoring or I am against this program. I just believe that it will not help us to come out of the mess in which we are right now. This post is written only to provide general information to you and so that EACH one of you reading this can come with your own conclusions.
