Second Mortgages become interesting Cash Out Loan Alternatives

With all of the interest rate talk these days at the water cooler, it seems that everyone knows where the interest rates are going except for the Federal Reserve. Of course citizen are speculating, and if they do predict where the interest rates are headed, they legitimately could not tell you when they are rising or dropping.

As most of you have realized by now, the first mortgage rates may not go back down to the 2004 levels when the 30 year fixed was in the low 5's. Over the last 3 years, most homeowners have refinanced to an interest rate they are very comfortable with.

As the housing store shifts, the inquire for money is still great, but citizen will be taking out second mortgages to get cash and concentrate revolving debt. Second mortgages, also called home equity loans have come to be favorite alternative loans that do not need homeowners to refinance their current home loan. As you can imagine, many homeowners would rather leave their low interest 1st mortgage untouched and naturally take out a second mortgage on the asset for incidental cash like make home improvements or financing a second home.

With the store changing, it is leading for consumers to understand how home equity loans work. 2nd mortgages are liens that are taken out against your home for purchase, or cash out refinancing. Second mortgages do use your home's equity, so you want to be thrifty and pragmatic when leveraging your home.

Home Equity loans 125% - These liens are high Ltv 2nd mortgages that all you to borrow against your home's future value. It is hard to believe, but no mortgage guarnatee is required! The interest rate is fixed and the most coarse use of funds for these loans is debt consolidation.

Home Equity Line of reputation 100% - Home equity lines are more revolving reputation that carries a variable interest rate based on the Fed's Prime index reported in the Wall road Journal. You only pay interest when you use funds from the line, and only the interest is due each month during the draw period. The most coarse use of funds with a Heloc is for financing home improvements.

Which ever second mortgage appeals to you, remember to look at the closing costs, interest rate, and either or not there is a pre-payment penalty. When you are talking with some brokers or lenders the best way to collate the loans is to view the "Good Faith Estimates" which will be in case,granted with the loan disclosures. If you don't qualify for a 2nd lien, reconsider a Fha mortgage loan that offers cash out and refinancing up to 95%.

Second Mortgages become interesting Cash Out Loan Alternatives

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Obama's Harp agenda - Why Banks Aren't Lending according to the Government's Suggestions

The government decided that it was time to bonus responsible homeowners, those who make their payments on time and have never defaulted. They created the Home Affordable Refinance program; not only one version, but a new and improved version called Harp 2.0. In it, homeowners are supposed to be able to refinance regardless of their equity position, regardless of Debt to wage ratio and regardless of past credit. All You Needed was to be on time 11 out of the previous 12 months with your Mortgage payments.

Sounds like a great plan right? Sure! However, the big banks don't want to play ball with Mr. Obama and his Harp plan. You're hard pressed to find a lender who is lending without any of their own restrictions to the plan. In fact, for one reckon or another, it is like shoving a square peg into a round hole. For example, there is supposed to be no restriction to how under water your home is. However, what most lenders are saying is "sure, as long as you get a asset Inspection Waiver, we'll lend on unlimited Ltv". Otherwise, most lenders are lending up to 125% Loan to Value (how much you owe divided by how much your home is worth). The question is that most borrowers under water more than 125% and there are many factors at play that determine whether or not you will qualify for a asset Inspection Waiver. So most borrowers that are over 125% Loan to Value are looking themselves out of luck!

Additionally. On March 26th, Fannie Mae made it even easier to get a Harp loan. Even if you have a Bankruptcy or a Foreclosure in your past, you will no longer have to wait for 7 years to qualify. Past Bk's or Foreclosures wouldn't impact your qualification to get an interest rate in the low 4% range! That's great for the hundreds of thousands of Americans that had to Short Sell a home to safe their financial picture. The problem; even though Fannie Mae says it's so, Most Big Banks won't sign on. As of the date of this article, no lenders will give an approval if a borrower has a Bk within the last 48 months.

The next thing that has been recently updated is the debt ratio requirement, It is supposed to be that your debt to wage ratio (amount of money you put out every month to service your debt divided by your gross income) will no longer be a factor when trying to qualify for a Harp loan. Unfortunately, true to form, No Banks are stepping up to the plate on that one either. Most lenders are sticking to the 45% back end debt ratio requirement for qualification.

Although this description paints a bleak photo of the reality of the Harp program, what you need to note is that this author consistently says "most lenders" when describing who is doing what. The reality is that although the "big banks" don't want to take a chance, there are smaller, portfolio lenders who are looking at this opening to buy market share. There are some lenders who are shoving those square pegs into round holes. You just have to find one that knows everyone's qualifications. There are so many separate programs and restrictions, it is very difficult to frame out what lenders will lend to your specific scenario.

If you've been turned down by your current mortgage servicer or the local bank, Don't give up!

Obama's Harp agenda - Why Banks Aren't Lending according to the Government's Suggestions

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