Cleaning gutters and downpipes is likely the most important home maintenance job that is frequently ignored. The purpose of maintaining your home is two-fold; firstly, to keep it wind and waterproof, and extend its life, and secondly to maintain its value. Ignore this and your equity will soon drop. Not good!
Some people never clean their gutters, while others leave it too late. They wait until the last leaf has fallen, by which time the damage can be done. What damage? Here are some of the problems that can be caused by neglecting this chore.
1. Cleaning Gutters: Weight of Debris
As dirt and vegetation accumulate in your guttering, they absorb water and also promote the growth of seeds deposited on your roof by birds. All of this can become very heavy and place excessive stress on the clips holding your gutter in place. The guttering itself is not attached to your house, but to brackets attached to the walls.
Once the weight of the gutter and its contents exceeds the holding capacity of the brackets, it will detach and fall to the ground. If not directly, the brackets may be weakened, and loosen with the next snowfall. The snow thaws at roof level, slips down the pitched roof and brings down guttering attached to insecure brackets.
2. Water Damage
Gutters are designed to collect rainwater and lead it into downpipes to be drained safely away from the property. If the gutter is full of debris, the water will overflow and run down the sides of the walls. This can get down to the foundations of your home and destabilize it. It can also be uncomfortable to leave your home with a waterfall by your door. Downpipes can become blocked making this scenario all the more likely. Cleaning gutters can avoid this.
A major problem with water penetrating a wall is that the dampness will rot the internal wood structures. This can remain unseen for a considerable period while the structure of your home becomes undermined. Wet and dry rot are both caused by dampness, and can be very invasive and costly to eradicate.
3. Water Freezes
After fall comes winter, when all that water freezes. Water expands when it freezes, and weakens the structures of your home, including the foundations. Bricks, cement and concrete can crack. Once the water melts, it runs further into the cracks, and so the cycle of freezing and thawing continues, all the time weakening the structure of your home. That is the worst scenario, and it does happen to the homes of people that avoid cleaning gutters.
4. Cleaning Guttering: What to Do
Cleaning gutters is not difficult, but it does involve heights. The easiest solution is to employ someone to clean out your guttering, and make sure that your downpipes are clear and functional. Make sure they are insured for this work! It could cost you a lot if there was an accident. There are firms that specialize in this type of home maintenance, but even then make sure they are insured. Don’t just let your neighbor do it for a few dollars.
Alternatively, use a ladder and do it yourself. Make sure you have somebody holding the ladder. Pull out any grass and vegetation and use a trowel to clear the mud. While it is best to use a bag to collect the debris, you can also simply let it fall to the ground then clear it up there. Use a garden hose, if possible, to flush out the gutter and make sure the water flows freely.
Clean your gutters out regularly: once every 3-4 months if possible. Do not wait until after fall, because by then it may be too late. A regular contract with a specialist company is the best solution. Cleaning gutters is more important than most people realize.
Before we discuss mortgage interest rates and inflation, we must all first agree on what the term ‘inflation’ means. Many believe it to mean the increase of prices in the shops, but that is just a symptom. You should look upon it as being a reduction in the value of your dollar, so you have to spend more dollars to purchase the same car, dress or packet of pasta.
What is Inflation?
The symptoms of inflation are paying more for fuel, clothing, groceries and travel. Your dollar has less purchasing value over time. What you are buying is not becoming more expensive as such, but your dollar is able to pay for less of them. So if last month a box of dried Italian pasta cost a dollar, but now costs $1.05, you need $1.05 to have the same purchasing power as $1 previously.
Inflation hits all the goods and services we purchase in many different ways, although fundamentally the dollar loses value against other global currencies. Here is how mortgage interest rates and inflation are connected.
Mortgage Interest Rates and Inflation
Mortgage interest rates and inflation are closely connected. When the dollar drops in value against global currencies, then the value of everything that is priced using dollars also falls: not their price, but their value. This includes bonds, among them bonds that are backed by the cash flow created by interest payments on mortgages. These are known as Mortgage Backed Securities (MBS.)
Because of this drop in value, demand for these bonds reduces and the stock exchange sells off MBS which leads to more being available on the market – and hence to a reduction in their market price as is normal with any item with low demand. Who wants to purchase an investment that is sure to drop in value and that cannot be sold at a profit!
When the prices of bonds drop, yields increase. Mortgage rates are based upon the yield of these mortgage backed securities. Mortgage rates therefore increase in turn, and put inflationary pressure on the USA economy – and this makes the situation even worse, leading to a continuation of this cycle. It is almost a law of nature: a drop in demand leads to increased interest rates. This is tipped off by the initial drop in the value of the dollar – or what caused that.
When to Lock-In a Mortgage Rate
When you are looking at mortgage rates, therefore, it makes sense to find all you can about the strength of the dollar and the expectation for inflation. The costs of war, for example, can divert resources and increase the price of goods, and so can an increasing demand for commodities by rapidly improving economies such as those of China.
Another inflationary action is the printing of money by the Fed. The more cash in circulation, then the less is its intrinsic value. Increases in income are also inflationary: as more people earn more, they compete for luxury goods, and prices increase. Ultimately this leads to an increase in interest rates, including mortgage interest.
We currently have a stable situation in the USA, but global unrest, the rise in demand for oil, gas, minerals and other commodities by countries such as China and 101 other factors that could affect the value of the dollar can soon change that. Keep your eye open on forecasts.
The Fed has given some security in stressing the current low inflation rate, and this has led to a demand for mortgage backed bonds that has helped maintain lower interest rates- but for how long will MBS be in demand in Wall Street? Mortgage interest rates and inflation go hand in hand – as the value of the dollar drops, rates rise along with shop prices – the consumer takes a financial hit all ways!
When you stage a home you are making it more attractive for sale. Silk flowers, reed diffusers and scented candles can make a significant difference to the look and ambiance of any home, particularly if used correctly. Here are some tips on how to stage a home for maximum effect.
Make First Impressions Count
First impressions count, or so the saying goes, and you should make sure that they count with your home. You are doing your best to get it sold, sure, but you also want a good price. There is a lot you can do when staging a home, such as tidying up your backyard and front garden. You can paint the external woodwork, and give the patio a makeover with a power washer.
How about inside your home? How do you make first impressions count inside your home? Yes, sparkling clean mirrors help to make your rooms look larger, and bright colors also give an impression of spaciousness. However, does it look lived in, or is it just a show house? Can visitors smell the burger you had last night with that lingering smell of fried onions?
Many people spend a great deal of time on the visuals, but what about the feel of their home. How about the way it smells and its overall attractiveness. For some reason human beings are attracted by color, smell and fire. The attraction most people have to a genuine log fire is the smell, sound and appearance of crackling logs. You can make use of that with a log fire burning in your hearth when potential buyers visit to check over your property.
Failing that how about some beautiful floral arrangements. Flowers are always pleasing to the eye when staging a home. You can replace the burning logs with candles – yes, candles have a similar psychological effect to any other type of flame. You can improve the way your home smells using reed diffusers – they not only look exotic but smell exotic. Let’s look at each separately.
How to Stage a Home With Silk Flowers
Real flowers are not always better than artificial because the petals fall off or die, and they lose their fragrance. Today’s silk flowers are frequently indistinguishable from the real thing visually. You have to feel them to spot the difference. Even the fragrance can be the same by judicial use of a floral spray. There are silk varieties of just about any flower available from your local florist – and then more.
You can purchase beautiful silk flower arrangements that are ideal for staging a home. They look fabulous all year round, so you have no problems selling your home in mid-winter. A slight spray of water mist makes them look even more authentic. You can purchase beautiful silk floral arrangements or large potted plants for your conservatory. Small silk trees for your patio or round your pool also look good.
Staging a Home Using Candles
Candles are available in an unlimited selection of colors, designs and sizes. You can select them to suit your home décor, either to match your furnishings or main color schemes or in bright primary colors as accent pieces. The objective is to make your home appear inviting and comfortable to live in. candles were designed to be lit, so don’t fill your hall and living room with unlit candles. Light them, and persuade viewers that they must have this house.
Reed Diffusers make a Difference
In fact reed diffusers make a big difference when you stage a home. They look exotic and oriental, and offer a more diffuse ad natural fragrance than a scented candle does. That’s because you smell the natural aroma of essential oils evaporating from the pores of the reeds. There is no underlying smell of burning wax as you get with scented candles.
Staging a home is a skill, and the most skillful gets the best price. Use floral beauty, a flickering flame and exotic fragrances to stage a home and persuade visitors that your home should be their home. Even your friends and relatives will wish it was theirs! If your home looks good and smells good, it is difficult for somebody not to love it.
Glass balustrading not only improves the curb appeal of your home, but offers the perfect solution to making your pool or balcony safe for everybody, young children included. Domestic pools have been the cause of many tragedies in the past, and railed balconies have frequently offered too small a challenge to youngsters with a desire to climb.
Naturally, there are regulations now that have been designed to prevent such accidents. However, you can make extra sure by installing glass balustrading. The glass itself meets all national and international safety regulations. It will not break even if a large adult falls against it.
Glass Balustrading and Curb Appeal
You can increase the value of your home by installing glass balustrades with top or side fixings. If you live by the ocean, they offer an uninterrupted view, unlike normal metal railings. However, what is more important when you come to sell your home, they also improve curb appeal. A beautiful expanse of shimmering clear or pale blue glass looks great from the curb or sidewalk. It certainly looks better than lengths of ugly metal railings.
You can also install glass balustrading around your pool area. Long sheets can be fixed top and bottom, or even just with bottom fixings, to prevent young children climbing over. Doors are fixed to open outwards only, and automatically close with the latches at a high level.
Your view of the pool is uninterrupted, either from upper level windows or from your patio area. You can easily see what’s going on while maintaining a safe barrier between the pool and the rest of the yard.
Using Glass Balustrades to Create Space
Many people use glass balustrades indoors – not just for indoor pools. They are useful for showers, to provide the sensation of space, rather than boxing yourself into an enclosed cabinet. You can make a room look significantly larger by removing a staircase wall and replacing it with glass balustrading fitted with a top banister.
It should be stressed again that all the glass used in such barriers is certified safety glass. It does not break under normal domestic conditions. In the unlikely event of a break, it shatters into small pebbles like a car windshield and does not create dangerous shards of glass.
Such safety barriers are finding increasing use as a means of increasing the value of a home, improving its outlook and appearance from the curb and for increasing its apparent interior size. Glass balustrading not only significantly improves curb appeal, but can also improve your selling price!
There are several mortgage options open to you when you are buying your home. The different types of mortgage loans available each have their own benefits and disadvantages according to your personal circumstances. Here are four types of regular mortgage options that you can consider when buying property.
Fixed Rate Mortgage
With a fixed rate mortgage you are taking a bit of a gamble. If the time is right, and interest rates are generally low, this might be worth the gamble. With this mortgage, you agree to a fixed interest rate to be applied over the entire life of your mortgage whether that is over 15 years or a full 30 years.
If mortgage rates remain fairly stable or increase over the period of your mortgage, then you will generally gain. However, if they drop then you will lose out. One of the man benefits of a fixed rate mortgage is peace of mind. You know exactly what you will be paying each month for the next 30 years.
You will not be subject to a hike in your monthly repayments if the interest rates generally rise. For many people that benefit is well worth the possibility of the rates dropping. They know that they need not spend the next 30 years keeping an eye on the interest rates, hoping they don’t rise.
Adjustable Rate Mortgage Options
With an adjustable rate mortgage you will start off with the lowest rate available to you. The interest you pay over the next 15-30 years will then vary according to an index that is broadly based upon inflation and the price of mortgage derivatives and other bonds offered on the stock exchange.
The Fed can increase interest rates to curb inflation. Mortgage rates also increase with a rising demand for home ownership. Mortgages of the same type are generally bundled together and then sliced into smaller portions known as tranches. These are traded as mortgage derivatives on the stock exchange. Interest rates can rise and fall with changing prices of these securities.
In short, with an adjustable rate mortgage, your interest rate can rise and fall many times during the tenure of your mortgage. Your rate will not change with each slight fluctuation, but will be adjusted periodically in line with general trends. Sometimes you will win and sometimes you will lose. If you have a large mortgage and cannot financially tolerate an increase in your rate, then a fixed rate mortgage might be best for you.
Fixed Then Adjustable Rate Mortgage (Hybrid ARM)
With this type of mortgage, your interest rate is fixed for an initial period such as 2-3 years, and then switched to an adjustable rate. The fixed rate portion is usually set at a low rate of interest to enable you to pay a smaller amount for the first few years.
You then switch to a variable rate once you are earning more money. This is a good option for young people buying their first home, and who expect reasonable salary increases over the next 2-3 years. It makes home purchase more affordable in the important early years. Over 30 years, for example, a 3-year fixed interest period would be referred to as a 3/27 mortgage loan.
Deferred Interest Mortgage
With a deferred interest mortgage, interest payments are deferred for a period of time, and amortized with the rest of the loan. In other words, you pay the deferred interest over the remaining period of the loan – although you will be paying interest on the deferred interest! Even so, many people find that this one of the more attractive mortgage options, enabling them to purchase a larger home than they could otherwise afford. They go back to a regular mortgage when they are earning enough to afford the repayments. This is an option to a hybrid ARM.
Choosing From These Types of Mortgage Loans
When choosing one of these mortgage options you should first analyze your own finances. Determine what you can afford to pay now, and what you might afford in 2-3 years time. If you overestimate your future income, then you could be in trouble. That is why you should always take the advice of a mortgage professional when considering these different types of mortgage loans.
A second lien is also known as a second mortgage. It is different from refinance in that your mortgage arrangements remain constant, but you pay an extra monthly repayment for the loan. A second lien and second mortgage are fundamentally the same, and are based upon the equity of your home.
Real Estate Equity
Real estate equity is the difference between the current value of your home and what you still owe on it. Let’s say you purchased your home with a $400,000 mortgage and have repaid $150,000 of that capital sum. Your home has been valued at $750,000. Your equity will be $500,000 (work it out.) If you need cash for extensive repairs or improvements, or even to buy a new boat, you can raise some on your home. Your equity is $500,000 so you can raise a good proportion of that as a second lien – or second mortgage. These terms mean the same thing. You could also use your equity to refinance your mortgage. This means scrubbing your existing mortgage and taking a new one based upon what you currently owe. You can extend your repayment period and reduce your monthly repayments. Some people find this an attractive option, particularly if they are beginning to struggle with the existing monthly repayments.
They have a lot of equity (500,000) but are still paying for their original $400,000 mortgage! It makes sense to them to refinance the mortgage as they are paying less. However, is this a good decision, and would they be better off by refinancing the existing mortgage or taking a second lien on their home to fund the improvements (or vacations!)? If you refinance your mortgage, you will have high closing costs and have to pay private mortgage premium costs on your mortgage. Loan approval can take some time, and the entire process can be lengthy and stressful. This is not your first mortgage, remember, when you were excited and looking forward to owning your first home. This time round you do not want it to be a long, drawn out affair.
Second Lien Advantages
A second lien or second mortgage (same things) is significantly quicker to arrange. You keep paying your existing mortgage repayments, but also pay for the second mortgage each month. If you are confident of meeting both payments, then this is the way to go. However, keep in mind that if you fail to maintain either set of payments then you could lose your home. However, if you take this path then you will save on private mortgage insurance and your tax deduction will also be more attractive. Not just that, but you will be able to avoid escrow payments if you want and your equity will increase at a faster rate. Equity is always good to have when times get bad!
Which is Best?
So which is best for you when you want extra cash to carry out home improvements or pay your kids’ college fees? A second mortgage or refinance your home? The balance seems to lie with the second mortgage, but keep in mind the big negative! You could lose your home by failing to make the payments. That said, the second lien seems just to swing it – but the choice is 100% yours.
Have you ever tried to visit a home on the market for sale, only to be told by a real estate agent that they won’t show you the property until you have a mortgage pre-approval? You might view this as a time-consuming process or an unnecessary intrusion into your finances, but there are a number of good reasons to support this requirement.
First, many sellers do not want their house being shown to someone who is not serious about buying it, especially in a seller’s market. Look at it from the home seller’s perspective. The seller has to clear their family out and clean the house on a weekend for someone who may be “just looking”. Furthermore, there is a potential security risk in showing a home to someone whom the seller, and even the buyer’s agent, know little about. Many sellers are uncomfortable with this.
Even if a buyer does like the home and is serious about making an offer, a seller will not seriously consider any offer from a buyer who has not been pre-approved. They simply won’t accept the risk of taking their home off the market for a month or more of prime selling season while a buyer figures out if they even qualify to get a loan to buy that house.
Another good reason to get pre-approved is to see how much of a home a buyer can qualify for and on what terms. The pre-qualification process involves taking some basic information, running a credit report as well as the potential borrower’s debt ratios, and collecting some documentation. Typically, a buyer can be pre-approved within a couple of hours. This process will often uncover unknown credit report items that can be addressed in advance to enable the buyer to obtain a better rate and thus, more of a loan. It will also allow the buyer to shop around for a lender so that valuable time is not wasted doing this while they are under contract. Lenders can also advise on what types of programs might be available in certain areas.
Lastly, there is the question of etiquette. Believe it or not, there are people out there who look at houses as a hobby, with no real intention of buying. A real estate agent’s time is valuable. They work on straight commission and often give up many hours of family time on the weekends to show property, often to people who will never buy a home. Very simply, it is disrespectful to monopolize an agent’s time if you are not serious enough to answer a few questions for a lender a couple of hours before going to look at property.
Ultimately, getting pre-approved benefits all parties involved and represents a small time investment given the magnitude of a home purchase. To get started on your pre-approval right away visit our pre-approval link and we will help you start your house hinting right away!
What is a short sale and how does it work? How many times have we heard these questions? Too many unfortunately, although fewer now that the main effects of the subprime derivative collapse have all but run their course. It can be a complex topic to explain fully, but here are the main aspects of this solution to owing money on a negative equity home.
What is a Short Sale on a Home: Short Sales Explained
Before going further, let’s explain what a short sale fundamentally is. At its most basic it the sale of property at a sum below the balance of the mortgage still owed on it. For example, if you still owed a bank $440,000 on your house, and it was currently valued and sold at $420,000, that would be a short sale.
It would have to be agreed between the owner of the property and the bank. It is generally used when the alternative would be a foreclosure. If the homeowner was broke, then the bank and lender might take the view that the cost of the foreclosure proceedings would make it easier and possibly even cheaper to cut their losses and mutually agree to a short sale.
Negative Equity Solution
A short sale on a home only makes sense if the home is in negative equity: i.e. its current value is worth less than what is still owed on the mortgage. If it has positive equity, for example if its value in the above example was $480,000, then the owner could sell it to pay off the mortgage or the bank could foreclose.
However, house prices are not rising so fast these days, with many remaining fairly static, so some mortgagees are finding that the equity on their homes is not reducing as they maintain mortgage payments. When they get into difficulty, they often find that the equity has become negative. This is particularly the case with low or even zero down payment mortgages that were popular when banks and building societies were keen to promote house purchase.
Is a Short Sale on a Home Easy to Arrange?
Absolutely not – they just as complex a procedure as a foreclosure. Short sales are not automatically offered, even if you are in the classic situation that warrants one. You have several things to prove before a bank or building society will even listen to you. The most important of these is documented evidence that you are broke. You must prove that you can no longer afford to make mortgage repayments, and that there is no other option available to you other than foreclosure.
The lender will have to be 100% convinced that they will lose money if they foreclose on you, and that is not a simple thing to convince a bank of. Even if the bank does agree, a short sale is not handled like a normal home sale. You, the bank, the real estate agent and the new buyer all have to cooperate.
This is not a preferred solution for the bank. It is a last resort for the lender and for you, and only when it realizes that it is a cheaper option than foreclosure will the bank agree to a short sale.
The Consequences of Short Sales
The main consequence is that you lose your home – period! You get nothing in return but to owe no mortgage. One benefit is that it looks better on your credit record than a foreclosure, and you will finish up with a better credit score because you will have cleared your mortgage. However, it might be better for you to consider some options before going straight for a short sale.
You might be able to rearrange your mortgage loan, or perhaps even refinance to pay off your arrears and get back on a level footing. Discuss these options with your bank first. If you do, and they fail to be viable options for your circumstances, the bank might be more likely to offer a short sale because you have made an effort to find an alternative solution. So what is a short sale? It is not a first choice solution to a problem, but might be offered if you have negative equity and no other option.
Mortgage backed securities (MBS) are also known as mortgage derivatives and mortgage-backed bonds. They are a form of investment that is based upon the mortgages of home buyers. As such, they affect the mortgage interest rate and can also have a significant effect on the economy if they go wrong (more on that later.)
What Are Mortgage Backed Securities?
Also known as MBS, such securities are a form of mortgage investment. When a lender such as a bank or building society grants you a mortgage to buy your home, the lender has to wait a long time to make profit from the interest you pay. This is particularly the case for 30 year mortgage loans.
If that lender wants to profit sooner, then it can bundle a bunch of loans with similar mortgage amounts, interest rates and repayment periods. Investors can purchase a portion of this bundle to profit from the interest paid on it. The lender receives an immediate income from the individual mortgages in that particular part of the bundle, and the investor waits for the longer term benefit.
Example of MBS in Action
As a simple example, take 1,000 people with $200,000 mortgages at 4% interest over 30 years. We shall calculate this at simple interest since compound interest only occurs in the event of negative amortization. That is where the payment you make is less than the interest charged on the loan.
The interest for a fully amortized mortgage over 30 years for a $200,000 mortgage is $143,739. Yes, that is correct – you pay that much interest for your home. That is why mortgage backed securities are popular with many investors. They are also known as mortgage-backed bonds and mortgage derivatives.
The 1,000 people in our example would therefore be paying out almost $144 million in interest over the 30 years. The bank involved will take its cut immediately by offering this $144 million for sale on the market. If you purchase a mortgage backed security you are promised a return on your investment that your proportion of these 1,000 mortgages would make. You do not purchase the mortgage itself.
Mortgage-backed bonds belong to a class of securities known as derivatives whose value lies in an underlying asset. In this case, that asset is the mortgage bundle. The risk of such mortgage derivatives is spread over the whole bundle of loans – in this case 100,000 (this a simple figure used for example only.)
This term has become a dirty word to the layman due to the sub-prime mortgage derivative crash of the mid to late 2000s. This will be discussed in a later post. It certainly proved that the derivatives market, at least where it involved mortgage derivatives or securities, can be very risky without the high rewards for taking such risks.
When investing in mortgage securities, you can purchase your investment from certain subdivisions of thee bundle, known as “tranches.” The lower the perceived risk, the lower your potential return. A tranche comprising income from the first 3 years of a mortgage will be less risky than a 5-7 year tranche.
People are more likely to maintain their mortgage repayment in the first three years than later. Where borrowers have taken adjustable rate mortgages, the return in the later years will be higher- though the risk will be greater. The choice is yours, but if you intend investing in mortgage backed securities, you should take the advice of a financial or mortgage advisor that is independent of a bank or building society.
Finally. . .
In most cases mortgage backed securities (MBS) or mortgage derivatives are fairly safe investments. People usually pay their mortgages, and you have a safeguard against non-payment in the size of the bunch of mortgages included in your tranche. However, when home prices drop so does the yield from such mortgage backed bonds. A declining market for mortgages leads to a decline in your income from such bonds or securities.
Mortgage underwriting is an important part of the mortgage process. A loan underwriter assesses the risk of offering a mortgage to a specific individual and determining the likelihood of the mortgage loan being repaid as agreed. To carry out such an assessment, a mortgage underwriter will take certain factors into consideration. These are Credit, Capacity and Collateral, known as the three Cs.
Mortgage Underwriting: Credit Score
Your credit score or FICO score is important to a mortgage underwriter. The underwriter will be interested in how much credit you currently have and how well you are managing it. Are you maintaining your payments as agreed? Have you too much credit for your current income to manage?
The history of your credit and repayments will be important. A lender will look for you having had a number of revolving credit accounts with good repayment records. If you are a buyer with no previous credit, then you may be regarded as a risk. No credit is almost as bad as bad credit!
Mortgage underwriting looks closely at any credit you have with respect to your housing. How well you have maintained previous mortgages for example. If you have rented, then the frequency of your rental payments will be a significant factor in their decision. If you have been delinquent on a mortgage or rental payment in last 24 months then you may have a problem.
Capacity to Pay a Mortgage Loan
The function of a loan underwriter is not to offer the loan, but to assess your ability to pay. Part of that analysis involves your capacity to pay. This will be based on your income and expenditure. The self-employed have most problems in this respect. That is because they are not guaranteed a regular income.
Employed people receive an income each month. If you are paid on the same date each month then the mortgage repayment can be arranged to be paid by direct debit every pay day. Without a guaranteed regular income, the capacity to pay a mortgage loan will be diminished in the eyes of the mortgage underwriter.
Your type of employment and security of employment are also factors in mortgage underwriting. If you work in a seasonal job, such as a holiday camp manager or in the vacation industry in general, then you will be a greater risk than a physician. An extreme example, perhaps, but it explains the type of concern important to loan underwriters.
Collateral to a Loan Underwriter
Mortgage underwriting involves security of the mortgage loan being offered. Collateral is a large part of the decision. In many cases, collateral is the security. An appraiser will determine the value of the real estate and the loan underwriter will take the ‘loan to value’ ratio into account. This is the amount of the loan relative the appraised value of the property.
Fundamentally, the collateral is the value of asset owned by the borrower. In mortgage terms, this will generally be the value of the home itself. That is why 100% mortgages are rare. In mortgage underwriting, the lender must be able to recover the capital in the event of the borrower defaulting on payments. A mortgage will be offered at a percentage of the purchase price – often 80%. This means a 20% deposit that the buyer would lose if they defaulted on the agreement.
Mortgage Underwriting: Summary
The decision to offer a mortgage will be based upon the analysis of the loan underwriter. This will take each of the above factors into consideration and perhaps some others. Mortgage underwriting is based on three factors. A combination of your credit record, your ability to pay and the security you can offer the lender. If you have a good record of making your mortgage or rental payments on time, then you should not have a problem.