The Consequence of a Bad Debt

Despite the seemingly promising upstream motion of economics in recent years, the number of people with less-than-perfect credit histories is still steady. We deduce it has more to do with proper information and literacy when it comes to finance driving consumers into sinkholes and trapdoors.

Nowadays, mortgage companies are becoming more cautious about who they lend to. While we can confirm this, it is also something that is rather easy to explain. One bad debt is a black mark on any financial record, which translates to us as a red flag.

If you had your financial record smeared due to a previously bad decision or misinformation, you’re likely going to have a hard time getting hold of a mortgage. In plain terms, here’s why:

What a Good Debt is Not

A bad debt is called bad for a reason. Compared with good debt, it represents a tough time when you took something you couldn’t afford and something that could have drained your wealth. Bad debts are also likely to have no realistic repayment plans and are often due to impulse purchases.

Your financial record is not only a representation of what you have, but of your character as well. Some lenders either take a squeaky-clean credit history or they don’t take you in at all. Whether it was tough time or a bad measure of judgment, a bad debt in your history will send your loan chances into freefall.

A Patchy Credit History

However, despite the pessimism of most lenders to people with patchy credit histories, there are still certain home deals available, although only very little. Lenders today are pickier than before because they’ve gone through the bites of recession and difficult clients before.

Altius Mortgage Group is Utah’s premier loan resource and service provider. Although we are wary of our clients, we want to give each of you a chance to communicate your problems and your needs. We try our best to find each of you a solution that works for all of us involved.

Contact us today and see what our 5-star rating is all about.

The Role of Rising Mortgage Interest Rates to Housing Prices

The Atlantic reports that mortgage interest rates will rise. But as with all volatile markets, no one knows the exact interest rate increase until the market corrects and the economists are just looking back.

Many Americans find mortgage their biggest debt alongside student loans, and the most important one once they reach adulthood. Here at Altius Mortgage Group, we aim to help you decide on your home buying pursuits, however the mortgage weather fares.

Inverse Proportions on Mortgage Interest and Home Price

If those who already incurred mortgage fear the rise, those who haven’t and are looking into getting a property would be thrilled to hear this. Apparently, some observe that rising mortgage interest rates affect housing prices inversely.

Housing market experts explain one way this is true. Some property sellers find it more difficult to sell once the mortgage rates are declared on the rise. To entice home buyers despite the mortgage scare, they lower property value. With the market seemingly more penetrable, the sellers get their chances to dispose their properties in the midst of the crisis while the buyers take advantage of the low down payment.

Is This a Good Thing?

In one perspective, it could be a good thing to buy a house at a more affordable price even with higher interest rates. On a closer look, the panic only makes more losses to the seller and possibly to the buyer in the long run, but this is just hypothetical and ideal.

In reality, potential property buyers who are intimidated by the mortgage increase will try to steer away from the market until it returns to equilibrium and home prices are back to its real value. Sellers will also try to hold on to their properties a little longer until such a time their values get back to safe marketing levels, that is, when they can get a higher return after waiting for the spell to end.

The truth is, there is no saying whether the housing market reduces or increases their price in tune with the mortgage interest rates. The overall economy, changing demographics, and laws all decide what happens to the housing valuation at a given period in a specific location. Until then, you can only prepare your response.

Choose a reliable mortgage consultant to help you achieve your goals to have your dream home. If you want to learn more about mortgage loans and apply for one, contact us.

Comparing Adjustable and Fixed Rate Mortgage

When you are preparing to purchase a new home, one of the decisions you need to make is whether you are going to get a fixed-rate or an adjustable-rate mortgage. The two types of mortgages have some pretty significant differences, and choosing the one that is right for your situation will impact you throughout the life of your loan. Here are some important tips for comparing these two products.

Fixed-Rate Mortgages

After the housing market crash of the late-2000s you heard many people discussing the value of a fixed-rate mortgage. Many homebuyers prefer these types of mortgages to adjustable rates since they offer stability in payments from the time you purchase your home until the time you sell, regardless of what happens in the markets. The predictability of these loans means you are not watching the ever-changing market interest rates and wondering what your monthly mortgage payments will look like next month or next year.

Shopping around, comparing loans, and calculating your monthly payment are all pretty straightforward with a fixed-rate mortgage, and you won’t need to do any math or make any predictions about changes to interest rates for the near future, which is enough to make most homebuyers choose this option. These mortgages are often a better choice for someone who is planning to remain in their home for the long term (more than five years), or if there is a pretty good indication that mortgage rates could rise significantly in the near future.

Adjustable-Rate Mortgages (ARM)

One of the main disadvantages of a fixed-rate mortgage is if you are unlucky enough to lock in your rate at a time when interest rates are higher. If you buy today at a rate of 4.5%, but rates continue to drop over the next year to 3.5%, this lower rate could make a significant difference in your monthly payments. With an adjustable rate mortgage, commonly called an ARM, you will be able to take advantage of falling interest rates and can get a better monthly payment out of it.

ARMs also generally have lower initial interest rates, which can save you money if you are not planning to stay in your house for very long—for example, if you plan to flip the home or you are only temporarily living in an area for a job. However, if things change and you end up staying in your home longer than you thought, and/or interest rates rise significantly over the time you have your loan, you could see your monthly mortgage payments go up.

Deciding Which Loan to Get

Your best option will depend a lot on your personal financial situation and your plans for the home. Before making any decisions, sit down with an experience loan advisor from Altius Mortgage to discuss your options and make sure you clearly understand each type of loan.

Loan Programs With Little or No Down Payment

Ideally when you go to purchase a home, you will have between 10 and 20 percent of the total cost of the loan to put as a down payment. However, with the costs of homes on the rise, even coming up with 10 percent can be difficult for some buyers. Rather than waiting years and spending money on rent, some people prefer to get a loan through programs that allow for low or no down payment. In some cases these loans might cost more because you will need private mortgage insurance (PMI) or will have a higher interest rate, but it might be worthwhile depending on your individual situation.

VA Loans

Qualifying veterans may be able to get a loan through the Veterans Administration (VA), which guarantees that you can purchase a mortgage with no down payment at all. These loans come from private lenders, but are backed (guaranteed) by the VA, so there is no mortgage insurance and you only pay a small funding fee. Fees vary depending on whether you served in regular military, Reserves, or National Guard, and how many previous VA loans you have obtained.

Navy Federal Loans

The nation’s largest credit union, Navy Federal, offers 100 percent home financing for the purchase of a primary home (not a vacation or second home). Since only members of the military, their families, and some civilian employees of the Department of Defense can be members of Navy Federal, these loans are restricted to that group.

USDA Loans

The United States Department of Agriculture (USDA) has a rural development mortgage guarantee program, and is a popular one among many lenders and buyers. These loans are applicable to farmland, but can also be used to purchase homes in areas deemed eligible according to calculations like geography, household income, and whether you are a first-time homebuyer. The USDA levies an up-front fee of two percent rather than PMI.

Mortgage Insurance Loans

If you cannot qualify for one of the above programs, you might be able to get a conventional loan with low down payment and pay additional mortgage insurance. This insurance will be added to your monthly payments, and will be due as long as your loan is more than 80 percent of your total home value.

FHA Loans

Finally, you can consider FHA loans if you have at least 3.5 percent of the home’s purchase price for a down payment. These loans are ideal for someone who has a poor credit history and may have a hard time qualifying for a loan otherwise. These loans do include an upfront premium of 1.75 percent, and an annual premium of 1.25 percent, which adds up to about $100 a month per $100,000 borrowed.

If you don’t have 10 to 20 percent to put down, talk to your lender today about other options to see if you qualify for a low or no down payment loan.