WARNING: Many Home-Owners Could Be Living Above Their Means!

San Ramon, CA -- Federal Reserve Board Chairman, Alan Greenspan, commented best when he stated "Homeowners might have saved tens of thousands of dollars had they held Adjustable-Rate mortgages rather than Fixed rate mortgages during the past decade". If you own a 30year fixed mortgage, the first 10years of your payments will be applied towards paying down your mortgage interest; on average only 15% of your original principle balance will have been reduced. Considering the fact that most people will live in their homes approximately 5 to 7years, it makes since to plan what your goals will be before deciding on a loan program; your decision could affect your financial planning for the next 10years.

Statistically speaking, if you have a family of four (2 adults and 2 kids), a loan balance of $400K with an interest rate of 4.5% (4.642% APR), you'll need a Combined Yearly Income of $140,000 just to Almost Break Even each month; actually you could have a loss of approximately $478 per month.
Here's the breakdown: Income $140K per year x 35% (tax bracket) = $91K per year ($7,583 mo.) Monthly Expenses: $2,027 (Principle + Interest) + $417 (taxes) + $117 (home insurance) + $1K (2 car payments) + $800 (food) + $500 (health insurance) + $2K (family of 4 living expenses) + $300 (student loans) + $300 (credit cards) + $600 (childcare services) = $8,061 Total Expenses. These figures don't include any increases from your local county assessor's office, car repair bills, cost of living increases, cable or satellite services, utilities, etc.

Rather than considering shorter termed loans (with more favorable rates and payment options), the customer will keep their existing loan (they like the current low rate) and take out a Home Equity Line of Credit.
Currently our economy is prospering; this good news creates a rising Prime Rate, which increases the payment rate on your Equity Line of Credit. Some people are using their Equity Line of Credit accounts in order to maintain their current standard of living. One of two things will eventually happen: a) The client will have to prematurely sell their home because they can't afford the payments or b) The client will maximize their existing equity and be forced to make higher payments; this scenario has the possibility of a foreclosure waiting to happen.

In addition to establishing your goals and determining the right loan program, you should also understand the character of a real estate investor. Treat your property as an Investment and NOT a Retirement! Learn to use your equity as leverage in order to obtain greater wealth! Ask yourself what are you trying to accomplish with this transaction? In our opinion, "rate shopping" is the old process for selecting a mortgage loan and it should be replaced with "payment shopping". Did you know there's a loan program available that may have a higher interest rate than you currently have, but provides you with a lower monthly payment (plus extra monthly cash-flow), and no negative amortization? Also, don't view negative amortization as a dark cloud in terms of loan programs; depending on how long you plan on staying in your home, this lower payment option could be a blessing in disguise for the true Real Estate Investor.
Copyright � 2005 2002 - 2005 Brisco & Associates. All Rights Reserved

About the Author
Brisco & Associates is a growing company that offers services in the following categories: Mortgage Consultation, Contract Mortgage Processing, and Mortgage Education. Dwight Brisco can also assist your mortgage financing needs in 46 states. Visit our web site at http://www.freemortgage-info.com, select FREE Reports, and sign up to receive more information. Dwight Brisco is licensed (01380942) by the California Department of Real Estate.

Wells Fargo Home Equity Lines Of Credit Explained

Think you already know what this subject is all about? Chances are that you dont, but by the end of this article you will! Wells Fargo offers a revolving credit line for homeowners called Home Equity Lines of Credit, or HELOCs. This line of credit is an open-ended, revolving loan that allows future advances up to the approved credit limit.

You can use the money for home improvements, debt consolidation, medical expenses, investment opportunities, starting a business, education, a new car or boat, or any other major expense. Since Wells Fargo's Home Equity Lines of Credit are revolving loans, you can use only the money you need when you need it, much like credit cards.

This credit is available at any time during your draw period with convenient access through your Wells Fargo credit card, checking account, ATM, online banking, or local bank. The draw period of a Home Equity Line of Credit is the amount of time the line of credit is open, usually ten years, after which the line of credit is closed and repayment starts.

Keep reading further to learn how this topic can benefit you, as the rest of this article will supply you will the needed information.

Advances taken out during this draw period may have small monthly payments in which only minimal amounts are paid toward the principle with the rest of the payment going to accrued interest, or interest only payments may be made. Wells Fargo offers plans that allow repayment of the Home Equity Line of Credit loan over a fixed period of time after the draw period has ended. Some of these plans allow up to thirty years repayment time.

Interest of Wells Fargo Home Equity Lines of Credit is variable and tied to the Prime Lending Rate, the rate in which most major banks charge their largest and most credit worthy customers. This variable rate usually has a cap to limit how high of an interest rate can be charged and some have limits as to how low the interest rate can get. Variable rates are subject to quarterly adjustment though some plans offer a fixed interest rate. The interest paid on Wells Fargo Home Equity Lines of Credit is only paid on the funds that are used and is usually tax deductible.

Like Home Equity Loans, Home Equity Lines of Credit have fees that may be charged for taking out the loan. Some plans call for one-time; up front fees while others have annual fees. Plans that offer low monthly payments during the draw period may require a balloon payment at the end of the loan period requiring the entire remaining balance to be paid.

Other fees can also apply such as appraisal fee, credit check fee, and closing costs. The Federal Truth in Lending Act protects the borrower by requiring the lender to inform the borrower of all costs and terms when the application is given. Still need more information about this topic? To learn more, visit your local library or do a simple Internet search.





About the Author:

Ken Charnely is a personal finance enthusiast with http://www.online-loans-pro.com/ dedicated to quality information on online loans. For all your online loan needs visit and apply for loans online
Source: www.isnare.com

What Equity Is and How to Use It

With the current popularity of loans based upon home equity, a lot of people find themselves wondering exactly what equity is and how it's used.
If you're one of these people, take heart... by the end of this article you'll have a much better understanding of home equity and exactly what happens when you take out a home equity loan or a home equity line of credit.
First of all, though, you need to learn what home equity is and how it is created.

Defining home equity
Home equity is an often-used term in the advertising of financial services these days, but most of the ads that use it don't bother explain what home equity is.
At its most simple, home equity is the amount of the house or other real estate that you actually "own"... it's the portion of the mortgage on the property that you've actually paid off.

A house that was purchased a few months ago will have little to no equity, since at best only a few payments have been made toward the mortgage amount; a house that was purchased 15 years ago, though, will have a good portion of the mortgage paid off and will therefore have quite a bit of equity built up.
The more equity there is in a piece of real estate, the more valuable that property is in the eyes of lenders... after all, that's a much smaller portion of the property's value that still has to be paid off.

Using your equity
In order to use your equity effectively, you'll have to use it as collateral for a loan or a line of credit. The amount of equity that you have available will be a major factor in the amount of interest that you pay and the loan terms that you are subjected to; the more equity that you have in your home, the lower the amount of the home that's still left to be paid off should you not make you loan payments on time.

Of course, there are a few differences between home equity loans and home equity lines of credit... each can be used in specific ways, and the situation that you plan to use them in can determine which of the two is the better choice for your needs.

Home equity loans
A home equity loan is a specific amount that you borrow from a bank or other lender and that is going to be used for a specific purpose.
A home equity loan can be used to pay for a variety of expenses, such as automotive financing, debt consolidation, or home improvements, or it can even be used to refinance the mortgage at a lower interest rate and monthly payment.
The important thing to remember is that home equity loans are of a specific amount, so the entire amount must be paid back to clear the loan.

Home equity lines of credit
As opposed to a home equity loan, a home equity line of credit sets a maximum amount that can be used (based upon the available equity) and allows the homeowner to use whatever portion of that amount best suits their needs.
This works in much the same way as a credit card, and allows for purchases over a longer period of time without having a specific set amount to repay.
Home equity lines of credit are often used for home improvements or when multiple purchases need to be made without knowing the total cost of all of them.
You may freely reprint this article provided the following author's biography (including the live URL link) remains intact:

About the Author
John Mussi is the founder of Direct Online Loans who help homeowners find the best available loans via the www.directonlineloans.co.uk website.

What Is A FHA Loan?

Most of us need to borrow some money at least at one point of time in our life. When we want to buy a car, to study at the College or University, when we want to buy a house or home, when we need money to start our own business - even when we use our credit cards.

There are many types of loans and mortgages, such as FHA loans, Student loans, College loans, Business loans, Personal loans, Commercial loans, Payday loans, Auto loans, Car loans, Vehicle loans, Mobile home loans, Motorcycle loans, Military loans, Construction loans, Home loans, house loans, home equity loans, Bridge loans, Disaster loans, farm operating loans, Agriculture loans, Debt consolidation loans, Direct Loans, Government loans, Unsecured loans, refinance/remortgage loans, Bad credit loans, etc., just to name a few.

Within each loan term there are additional sub terms such as Fixed rate vs. Variable rate, Adjustable rate, ARM, PITI, HELOC, Balloon Mortgage, reverse mortgage, and other bewildering financial terms we will try to clarify here.

What is FHA

Home mortgages are important part of the loans universe but we will concentrate here On a specific one called FHA. The Federal Housing Administration (FHA), a wholly owned government corporation, was established under the National Housing Act of 1934 to improve housing standards and conditions. Its goal was to provide an adequate home financing system through insurance of mortgages, and to stabilize the mortgage market.

FHA is not a loan, It's an Insurance! If a home buyer defaults, the lender is paid from the insurance fund. An FHA loan allows you to buy a house with as little as 3% down payment, instead of the higher percentages required to secure many conventional loans. Taking advantage of the FHA loan program is a great way for first time buyers, or anyone with a shortage of down payment funds, to buy a home. It is not a program reserved only for first time home buyers. You can buy your third or fourth home with an FHA loan. The only stipulation is that you may only have one FHA loan at a time.

FHA helps low and moderate-income families purchase homes by keeping the initial costs down. By serving as an umbrella under which lenders have the confidence to extend loans to those who may not meet conventional loan requirements, FHA's mortgage insurance allows individuals to qualify who may have been previously denied for a home loan by conventional underwriting guidelines. It also protects lenders against loan default on mortgages for properties that include manufactured homes, single-family and multifamily properties, and some health-related facilities.

The two very basic terms you need to understand is A.PITI and B. Long Term Debt. PITI stands for Principle, Interest, Taxes, and Insurance. It is with relations to your Mortgage and property housing total monthly cost. Your maximum PITI should not exceed 29% of your gross monthly income.

Long term debt includes such things as car loans and credit cards balances. In order to qualify for FHA loan your PITI + Long Term Debt should not exceed 41% of gross monthly income.

This is much lenient terms compared to conventional loan terms of maximum PITI of 26% - 28% and Total PITI + Long Term Debt of 33% -36%.

Qualifying for an FHA loan you need the following:

- Good credit history that shows you meet your financial obligations.

- PITI + Long Term Debt not to exceed 41% of gross monthly income.

- Sufficient cash down payment at time of closing. 3% of the total cost.

- Closing expenses cost of 2%-3% of the price of the house. (Homeowner's Insurance, Attorney's fees, title fees, and title insurance, Private Mortgage Insurance if you are paying less than 20% down, the loan origination fee, and a fee that goes into the FHA insurance fund).

The FHA ARM - Adjustable Rate Mortgages is a HUD -US Department of Housing and Urban Development, mortgage specifically designed for low and moderate-income families who are trying to make the transition into home ownership. At the time it is issued, the ARM usually has an interest rate several percentage points below a fixed rate mortgage.

The interest rate can change as market conditions change. If interest rates go up, so does your mortgage payment. If they come down, your mortgage payment comes down, too.

The reverse mortgage is often of interest to senior homeowners. This loan provides cash for living, health or other expenses. Payments are made to the borrower in a lump sum or monthly. Most reverse mortgages are issued to those 62 and older who own a debt-free home with no tax liens.

A Home Equity Line of Credit (HELOC) lets you use equity in your home to pay for home improvements, debt consolidation or other financial goals. With an acceptable debt, credit and employment history, you may be able to borrow up to 85% of the appraised equity in your home.

Balloon Mortgage - the buyer pays interest for three to five years on a balloon mortgage. After that the entire principal comes due all at once.





About the Author:

Amit Laufer is a writer & internet marketer. MBA & Bsc. Computers and Information Systems. Owner & Editor of: http://www.loans-money-infoweb.com
Source: www.isnare.com

Which loan is which?

Here is a summary of some of the most common loans available today.

Home Equity Loan

A loan based on the difference between the present value of your home and its original price, less any unpaid balance on your mortgage. If your home is worth more now than it was when you bought it, that extra equity is considered to be collateral for this loan. You can receive the entire principal as a lump sum or opt for a home equity line of credit that allows you to pay only interest on money you've actually spent. Look for a no-fee home equity loan at a competitive rate of interest that allows you the option of just paying interest each month and does not require any repayment of the principal for 10 or more years. Although home equity loans are attractive because the interest you pay is tax-deductible, keep in mind that the lender can sell your home if you fail to repay the loan. If possible, try to repay a home equity loan in two to three years.

Payday Loan

Payday loans go by several names including cash advance, check loan, or post-dated loan. These are all the same type of short-term loan for amounts between $100 and $1000 depending on your financial situation. Payday loans are for small financial emergencies. You can save money on late charges or bounced checks by securing a cash advance against your next payday. You usually have thirty days to pay back the loan, although with additional fees you can take longer to pay back the loan. To apply for a loan you must have a job and a bank account with a check book. A poor credit rating or debt history is initially not a problem.

Auto Loan

This type of loan uses your car as collateral. The vehicle will belong to you at the end of then finance period with no residuals to pay. Until that time most lenders will keep the legal title to the vehicle in their name. If you can't make payments, the lender may be able to repossess your car and sell it. It may not be a bad idea to borrow money to buy a car if you intend to keep it for a long period of time and you can't or don't want to lay down cash for it.

Personal Loan

There are two categories of personal loans: secured and unsecured loans. The difference between the two is the use of collateral against the loan. Secured loans, using your belongings as security against the loan, are suitable for when you are trying to raise a large amount, are having difficulty getting an unsecured loan, or have a poor credit history. In an unsecured loan, the lender solely depend on the ability of the borrower to meet their loan borrowing repayments. These type of loans, generally, involve less money and need to be paid off in a shorter amount of time.

Business Loan

A business loan is designed for a wide range of small, medium and startup business needs including the purchase, refinance, expansion of a business, development loans or any type of commercial investment. Business loans are generally available at highly competitive interest rates from leading commercial loan lenders. A business loan can be secured by all types of collateral, varying from business properties to personal belongings.



About the author:

Karin Boode is the founder of the Loan Info Center, who strives to provide valuable information regarding any type of loan via the http://www.loan-infocenter.com website.