Don't miss the refi window

Four things to consider when refinancing your mortgage

By Amy Hoak, MarketWatch

CHICAGO (MarketWatch) -- Lured by low mortgage rates, many homeowners have been rushing to refinance. Interest is gaining for good reason: Eligible borrowers can lock in rates that haven't been this attractive in decades.

"With interest rates hovering around 5% for conforming loan amounts, homeowners should begin to seriously consider refinancing into a new fixed-rate mortgage, especially if they currently have an adjustable-rate mortgage," said Lisa Weaver, president of Columbia, Mo.-based Certitude Financial Group. And don't drag your feet, either, she said.

Rates on jumbo mortgages are still high, she said, but the national average rate on a 30-year fixed-rate conforming mortgage is the lowest in at least 37 years, according to Freddie Mac. The conforming loan limit in 2009 is $417,000 for most areas of the continental U.S., although in designated high-cost markets it will be up to $625,500.

Given the volatility in the mortgage market this year, Greg Gwizdz, national retail sales manager for Wells Fargo Home Mortgage, also advises homeowners to be proactive. It's possible that rates will be low for a while, but in this turbulent economy, it's not best to gamble that tomorrow will bring a better deal.

"Don't sit back and say I'm going to wait for something to happen and for rates to go even lower," he said. If you're able to refinance into a mortgage that will be better for your finances, don't pass up the opportunity, Gwizdz said.

Below are other points to consider:
1. Have an idea of home's value

Prior to starting the refinancing process, call a real-estate agent or look online at sites including Zillow.com to get an estimate of what your home could be worth, said Scott Everett, founder and president of Dallas-based Supreme Lending. If you're "drastically upside down" on your mortgage, meaning that you owe a lot more than your home is now worth, the possibility of refinancing might end right there.

"If you owe $250,000 and the house is worth $250,000, it [refinancing] is worth discussing," he said. But if you owe $250,000 and "the house is worth $150,000 and you're in Southern California, then you probably won't be able to do it," he said. Many Southern California markets have experienced a drop in home prices.

To get a better idea on a home's value, borrowers might ask their mortgage firm if the appraiser it works with could give a ballpark estimate before starting the process, said David Adamo, CEO of Luxury Mortgage, in Stamford, Conn. But that's still just an estimate until an appraiser comes out to your home, he pointed out.
2. Get ready for a thorough screening process

It's not impossible to get a mortgage in today's environment. But lending standards are likely a lot stricter than they were the last time you applied for a mortgage, so expect a thorough and frank discussion of your finances with a mortgage banker or broker before the application is even filled out.

Lenders are asking would-be borrowers to document income and assets thoroughly. In general, many also want FICO credit scores of 660 or 680 for conventional conforming mortgages; requirements are lower for loans backed by the Federal Housing Administration, Gwizdz said.

Those who might have a particularly tough time getting a mortgage today are self-employed homeowners who don't have two years of income documentation -- even if they have the income to support the mortgage, Adamo said. The availability of stated-income mortgages, which don't require borrowers to fully document their income, is limited, he added.
3. Know what you'll be saving

The old rule of thumb was that your rate should drop two percentage points for a refinance to be worth it, but that doesn't always apply anymore, Adamo said. If you can recoup closing costs of the new mortgage in the first 12 months -- and can save three-quarters of a percentage point on your interest rate every year thereafter -- it's probably economically justifiable to refinance, he said.

In any case, have a conversation about what rate would make refinancing worthwhile, and be prepared to take action. Borrowers also need to consider how long they want to stay in the property to determine which mortgage makes the most sense for their situation, Weaver said.

Sometimes you could be better off refinancing even if you don't get a better rate, Gwizdz pointed out. If you have an adjustable-rate mortgage that resets in a year, but can get a fixed-rate mortgage at the same rate, it's probably a good idea to refinance now if you plan on being in the home for years to come, he said.

He also cautions people about refinancing into mortgage terms that extend the life of the loan; doing so may bring monthly payments down, but will probably make the loan more expensive in the long term. "However, for homeowners that must have the lowest payment possible, it may be the right choice when combined with a lower fixed-rate product," Ms. Weaver said.
4. Don't count on cashing out

Tapping home equity through a cash-out refinance is much more difficult these days, due to stringent credit standards and loan-to-value requirements, Weaver said.

According to Freddie Mac, the share of refinances with a cash-out component was 63% over the first three quarters of 2008, the lowest level since 2004. Cash-out refinance mortgages have loan amounts at least 5% higher than the paid-off mortgage balances.

"The combination of declining home values and tighter underwriting standards have reduced the amount of equity that can be extracted by homeowners this year," Frank Nothaft, Freddie Mac's chief economist said in a news release.

These are a bunch of helpful tips to think about before refinancing your mortgage.

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Fed debt plan shaves nearly 1 point off mortgage rates

Bloomberg News

U.S. mortgage rates plunged by the most in at least seven years yesterday as a Federal Reserve pledge to buy $600 billion of debt succeeded where seven cuts in the central bank’s benchmark rate had failed.

The average rate for a 30-year fixed mortgage fell to about 5.5 percent last night after starting the day at 6.38 percent, according to an estimate from Bankrate Inc. It was the biggest one-day drop in at least seven years, said Holden Lewis, of the North Palm Beach, Florida, publishing and research firm. Today, the rate is "bouncing around" between 5.63 percent and 5.9 percent, he said.

Federal Reserve Chairman Ben Bernanke had received little help from lenders in his previous efforts to revive the U.S. housing market and halt its drag on the economy. The spread between the 10-year government bond yield and the average U.S. fixed mortgage rate was 2.8 percentage points last week, the widest since 1986, as banks hoarded cash rather than lower financing costs for homebuyers.

"Home resales have hung up because rates are high and because mortgage money has been scarce," said Neal Soss, chief economist at Credit Suisse Group in New York. The Fed’s move "may hasten the day when we finally find a bottom in housing."

The central bank pledged to purchase up to $500 billion in so-called agency debt as well as up to $100 billion in direct debt of Fannie Mae and Freddie Mac, the world’s two largest mortgage buyers, and Federal Home Loan Banks. The announcement was released at 8:15 a.m. New York time yesterday.

The Fed also said it would set up a $200 billion program to support consumer and small-business loans. Together, the programs almost match the $864 billion of U.S. currency in circulation, as reported by the central bank in a Nov. 20 statement.

"I was sitting in my underwear getting dressed in the morning when it came on TV, and I told my wife, ‘Rates are going down today,’" said Henry Savage, president of PMC Mortgage Corp. in Alexandria, Virginia. "Instead of buying stocks in stupid banks, the government finally is going to make a move to clear assets from the market."

Rates for a fixed rate mortgage with no fees or closing costs tumbled to as low as 5.25 percent from about 6.25 percent, Savage said.

"The market has been very good to me today," said Savage, who spoke last night from a bar where he was celebrating the rate drop with friends.

Homeowners who have enough equity to refinance their existing mortgages will get a boost as well, said Bob Walters, chief economist of Quicken Loans in Livonia, Michigan.

"You’re going to see an immediate impact on people who can refinance, taking their 6.5 percent interest rate to 5.5 percent or so," Walters said. "That will put $200 a month in their pockets."

Almost 20 percent of U.S. mortgage borrowers owed more on their loans than their house was worth in the third quarter as foreclosures depressed prices and the economy weakened, according to an Oct. 31 report by First American CoreLogic. Those owners would have a difficult time refinancing, Walters said.

The Fed’s move was a "one-time jolt" that should have lasting effects, Walters said.

"I’ve been trading mortgages for 20 years and you don’t see many days when one thing moves rates like this," said Walters. "You’ll see a pickup in demand for housing."

Still, stricter mortgage qualifications and growing job losses in a weakening economy will continue to hamper the market, even if the Fed plan manages to keep rates lower in coming days, said Sam Khater, senior economist for First American CoreLogic in Tysons Corner, Virginia.

"The market right now is not about rates, which are affordable, but about a supply of homes that is very high," Khater said in an interview. "The market won’t turn around and prices won’t stabilize until supply and demand become more normal."

The inventory of existing homes for sale in the U.S. rose to a 10.2 month supply in October, from 10 months in September, the National Association of Realtors said in a Nov. 24 report. In 2007, the supply averaged 8.9 months, almost double the 4.5 months in 2005, the end of a five-year housing boom.

The Fed plan "is one of the key actions we’ve been advocating ever since the Treasury altered its course on how it would use the $700 billion recovery package," said Charles McMillan, president of the Chicago-based Realtor’s group.

The Troubled Assets Relief Program, known as TARP, was approved by Congress and signed by President George Bush on Oct. 3. It gave Treasury Secretary Henry Paulson authority to buy assets after he told lawmakers he wanted to try to clear the market of "toxic" securities containing subprime mortgages.

Paulson used most of the first half of the TARP funds to buy equity stakes in troubled banks and in insurer American International Group Inc. On Nov. 12 he told Congress he wanted to use the second half to relieve pressure on consumer credit.

The Fed plan, in contrast, is focused on buying securities backed with "safe" mortgages that conform to the strict underwriting guidelines of Fannie Mae and Freddie Mac, according to Credit Suisse’s Soss.

"These are not the assets that have caused all the trouble - - these are quality mortgages that have been orphaned because investors have been reluctant to part with cash," said Soss. "The beneficiaries will be people who are buying or selling a house, because mortgage money won’t be as scarce."

Fannie and Freddie have about $1.7 trillion of corporate debt outstanding and $4.1 trillion of mortgage-backed securities.

"This action is being taken to reduce the cost and increase the availability of credit for the purchase of houses, which in turn should support housing markets and foster improved conditions in financial markets more generally," the Fed said in the announcement it posted on its Web site.

Consumers need all the help they can get to pay off their financial obligations.

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Treasury mulls plan to lower mortgage rates to 4.5%

Move would help homeowners and buyers with good credit, but would do little for troubled borrowers, experts said.

By Tami Luhby, CNNMoney.com senior writer

NEW YORK (CNNMoney.com) -- Lobbyists are pushing the Treasury Department to consider a plan to purchase mortgage-backed securities in the hopes of driving mortgage rates to as low as 4.5%, an industry source said.

Similar to an effort unveiled last week by the Federal Reserve, the proposal calls for Treasury to buy securities backed by 30-year fixed-rate mortgages from Fannie Mae and Freddie Mac. Details on the plan remain sketchy, but an announcement could come as early as next week, the source said.

The increased demand for mortgage-backed securities would prompt mortgage rates to drop. That, in turn, would enable homeowners to refinance into lower-cost loans and make it cheaper for potential homebuyers to get into the market.

Spokeswomen from Treasury and the Federal Housing Finance Agency, which oversees Fannie Mae (FNM, Fortune 500) and Freddie Mac (FRE, Fortune 500), declined to comment.

Last week's Fed move drove mortgage rates down to 5.5%, from 6.06% a week earlier. The Fed said on Nov. 26 that it would purchase up to $500 billion in mortgage-backed securities from Fannie, Freddie and Ginnie Mae, and that it would buy another $100 billion in direct debt issued by those firms.

Mortgage applications more than doubled as a result, the Mortgage Bankers Association said Wednesday. Much of the activity stemmed from homeowners looking to refinance.

Industry groups have been pressuring President-elect Barack Obama and lawmakers to lend a helping hand to the housing market. The National Association of Realtors, for instance, has called for Treasury to buy mortgage-backed securities.

Meanwhile, a coalition of industry groups have banded together under the "Fix Housing First" banner to call for measures including tax credits of up to $22,000 and the creation of a 30-year mortgage, carrying rates as low as 2.99%.
Experts see both pros and cons

Experts, however, had mixed views on how much a new Treasury initiative would help homeowners and the economy. Some felt lower rates would help stabilize the housing market by bringing in new buyers and would give those who refinance more money to spend.

"If it gets people buying homes and spending, it will help reverse the economy and get us out of this recession," said Scott Talbot, senior vice president of the Financial Services Roundtable, which is pushing the measure.

While it takes time to entice new buyers into the market, low rates accelerate that process, said Greg McBride, senior financial analyst at Bankrate.com.

"It is clearly designed to bring buyers into the marketplace and soak the inventory of unsold homes," he said.

But others questioned whether rates would remain low and, even if they did, only a narrow slice of credit-worthy borrowers would benefit.

Rates are already inching up, hitting 5.75% on Wednesday, said Keith Gumbinger, vice president of HSH Associates. Several government attempts to lower mortgage rates this year have failed to have a lasting effect.

Also, the proposal would do little to help troubled borrowers who have fallen behind on their payments, have no equity in their homes or have lost their jobs. With credit standards still high, these homeowners would not be able to refinance and take advantage of the lower rates, he said.

Finally, super-low rates could keep private investors out of the mortgage-backed securities market, forcing the government to remain the primary buyer of such investments, Gumbinger said. Rates have not fallen below 5.37% in more than 45 years.

"I can't imagine there will be a significantly active marketplace of people who want to buy at these low rates," he said.

It would be good if the Treasury Department would implement this plan. It would be a good help to people who are having trouble paying their mortgage.

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Mortgage rates near record low keep demand at 5-year high

NEW YORK (Reuters) — Demand for mortgage applications was unchanged during the Christmas holiday week, holding at the highest levels in more than five years with loan rates near record lows, an industry group said Wednesday.

Borrowing costs have tumbled more than 1-1/2 percentage points from summer peaks and are widely expected to slide further as the government steps in to stabilize the worst housing market since the Great Depression.

Fixed 30-year home loan rates averaged 5.03% last week, marginally lower than 5.04% a week earlier but well below the 6.59% summer peak in July, according to the Mortgage Bankers Association's survey of mortgage applications.

Last week's rate was the lowest since June 2003, the trade group said.

Another survey released Wednesday by Freddie Mac confirmed that rates are falling to record lows.

Interest rates on the 30-year fixed-rate mortgage averaged 5.10% for the week ending Dec. 31, down from the previous week's 5.14%, according to a survey of 125 lenders nationwide.

The 30-year fixed-rate mortgage has not been lower since Freddie Mac started the Primary Mortgage Market Survey in 1971.

"Interest rates for 30-year fixed-rate mortgages fell for the ninth straight week and represented a third consecutive all time record low since Freddie Mac's survey began in April 1971," Frank Nothaft, Freddie Mac vice president and chief economist, said in a statement.

The Mortgage Bankers Association's seasonally adjusted index of mortgage application activity was unchanged last week at 1,245.7, matching the highest level since July 2003 set the previous week.

Requests for home purchase applications climbed 1.4% to 320.9 on a seasonally adjusted basis, while refinancing application demand slipped 0.4% to 6,733.8 last week.

The refinancing index had surged by nearly 63% in the prior week, also to the highest level since July 2003.

Fast-falling mortgage rates are driving demand, particularly for refinancing.

The Federal Reserve's plan, announced in November, to buy up to $500 billion of mortgage-backed securities and its pledge this month to expand those purchases if needed to lower mortgage rates, has already cut borrowing costs.

On Tuesday, the Fed said it would start buying in January and purchase up to a half trillion dollars of mortgage bonds within six months.

Affordability is improving by other measures as well, with a record annual drop in October bringing home prices down more than 23% from their summer 2006 highs, according to Standard & Poor's/Case-Shiller home price measures reported on Tuesday.

Consumer confidence, meantime, plunged to a record low in December in response to the worst job market in 16 years.

Consumers are reluctant to boost spending when unemployment is spiking and when they could be committing money to a house that could cost much less later, analysts said.

Home owners who want to refinance would be unable to if the value of their home has fallen below the size of their mortgage.

More rigid lending criteria also mean that many mortgage applications may not be approved.

While mortgage bond purchases by the government press home loan rates down, "the one thing the Fed and the Treasury cannot do is improve the credit quality of the borrower," said Kevin Cavin, mortgage strategist at FTN Financial in Chicago.

The government interventions "can drive down primary mortgage rates and make getting loans much more affordable, make a borrower's monthly payments lower — if they can qualify," he said on Tuesday. (Editing by Leslie Adler)

it helps to have sliding borrowing cost during these tough times.

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Suthers cracks down on mortgage fraud

By John Rebchook, Rocky Mountain News

Colorado Attorney General John Suthers today said he has reached settlements with three mortgage companies as part of a crackdown on false advertising that he launched about two years ago.

Suthers said that Denver’s Arbor Financial Inc., 5280 Financial Group and Centennial-based Mortgage Toolbox have agreed to eliminate deceptive use of teaser rates in mortgage loan advertisements in newspapers.

Each of the three companies ran ads in the “Mortgage Marketplace” sections of the Denver Post and Rocky Mountain News, advertising low teaser rates and/or low minimum monthly payments associated with option ARM loans.

Disclosures of true interest rates and other loan terms were buried in agate footnotes, if included at all, Suthers said.

He said that several of the brokers interviewed during the course of the investigations remarked that these advertisements “made the phones ring.

” As part of the settlements, each of the brokers has agreed to advertise only traditional fixed rate loans or traditional ARMs, not option ARMs. The firms also have agreed to include certain disclosures about material loan terms in readable print. Finally, the brokers must ensure that at least 24-hours prior to closing, each borrower will be provided with a copy of the Consumer Handbook on Adjustable Rate Mortgages.

The Attorney General also has filed civil claims under the Colorado Consumer Protection Act in Arapahoe County District Court against Englewood-based Home Mortgage Solutions, Inc., and three associated individuals: owners Toan Le (aka James Le) and An Nguyen, and general manager Leonard Smith.

Home Mortgage Solutions allegedly used direct mail to market risky option ARM loans to borrowers without disclosing the associated risks, he said in a release.

The complaint alleges that Home Mortgage Solutions misrepresented the low introductory rate as a permanent interest rate, and made refinancing nearly impossible with prepayment penalties, facts which Home Mortgage Solutions failed to disclose to borrowers.

In another action, l Suthers reached a settlement with Englewood’s Encore Lending, LLC, and one of its owners, Paul Baker, for depositing money into borrowers’ accounts and inflating their incomes to qualify them for larger loans. Baker has agreed to surrender his mortgage broker license.

The Attorney General has also reached a settlement with Sacramento, California-based mortgage broker Tri-Point Realty, which he said sent letters to Colorado homeowners that appeared to be from a homeowner’s bank.

The letters urged the homeowner to refinance to take advantage of his home’s increased value. Tri-Point, however, had no affiliation with the lender and did not conduct any research to determine if the home had actually increased in value.

Mail that appears to come from the government or a homeowner’s bank is more likely to be opened and considered by the homeowner, and thus places honest advertisers at a disadvantage, he said. The settlement prohibits Tri-Point from further misrepresentations in its advertisements.

Suthers also said he has taken action to protect homeowners who are in foreclosure from “rescue” firms that are not following Colorado’s Foreclosure Protection Act, which he supported and saw passed during the 2006 legislative session.

So far, his office cease and desist agreements with 15 companies to prevent them from operating in Colorado until they follow this law.

Many distressed homeowners in foreclosure are bombarded with solicitations from companies that offer to help save their homes.

Under the Foreclosure Protection Act, homeowners enjoy many protections against abusive tactics. Rescue firms cannot accept an upfront fee and must provide the homeowner with a contract that specifies the services to be performed. Rescue firms are also prohibited from taking a lien or interest in the title to the home unless they provide certain disclosures.

Under the cease and Desist agreements, seven rescue firms have agreed to cease operations in Colorado until they comes into compliance with the Foreclosure Protection Act. Companies that have agreed to cease & desist during 2008 include: Crisis Management, LLC, in Glendale, Arizona; Davis Foreclosure Assistance, Englewood, N.J. Debt Advocacy Center; Cleveland; Franklin Equity, Santa Ana, Calif.; HomeAssure, New York, N.Y.; National Foreclosure Counseling Servicesl Jacksonville, Fla.: and New Hope Modifications, Bellmawr, N.J.

An additional eight companies have previously reached cease and desist agreements with the attorney general since the Foreclosure Protection Act was enacted, including one Colorado company, Denver Home Rescue.

Suther’s office also indicted 10 individuals last March in an $11 million mortgage fraud ring involving 34 local properties. Three of the defendants, Heather Etuk, Jennifer Wolsey, and Jessica Decker, pled guilty to felony and misdemeanor counts and received probationary sentences. The remaining seven defendants, including the alleged ringleaders, are scheduled for trial in late February and March.. Several other investigations of mortgage fraud are ongoing.

Suthers l urges borrowers to learn more and shop around before taking out a home loan. The Colorado Housing and Finance Authority has many free or low-cost programs available for consumers to learn how to buy a home and take out a mortgage.

Homeowners facing difficulties are encouraged to call Colorado’s Foreclosure Hotline at 1-877-601-HOPE (4673). Homeowners contacting the Foreclosure Hotline stand a much better chance of saving their home than those who go it alone.

These mortgage fraud companies are making life even more difficult for consumers. It's a good thing that people like Colorado Attorney General John Suthers are around.

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How the Fed’s Lower Rate Affects Consumers

By Vicki Lee Parker

The Federal Reserve cut interests rates in its efforts to restrain the credit crisis. The move that reduced the rate to 1% was a shot in the arm for Wall Street, which was up 10.1% last week. But what have all these cuts meant for the average consumer?

To find out, I spoke with Mark Vitner, Wachovia economist; Bill Hardekopf, CEO of www.LowCards.com; and Jeff Williams, a mortgage consultant with Allied Home Mortgage in Raleigh, N.C.

Here’s a breakdown on how they say the low interest rates have-or haven’t-affected some key consumer finance issues.

- Credit cards. Hardekopf said that lowering interest rates doesn’t automatically mean credit card rates will decrease. But over the past year, the rates cuts have kept the average advertised credit card rates stable at about 12%.

In other words, if you have good credit, you can still find low credit card rate offers. In fact, Hardekopf said that Capital One is currently offering zero percent on balance transfers and new purchases for 12 months.

“It’s certainly possible that others (credit card companies) will do the same,” Hardekopf said. The problem is that fewer people will qualify for the lower rates.

“The advertised rates are still low, but they are reclassifying the perimeters of what is considered good credit. Now, more people are falling into the average and poor credit categories,” he said.

To qualify for these low rates, people have to do everything possible to keep their credit score high, he said. That means pay your bills on time, don’t skip payments, don’t apply for a bunch of new credit cards, and keep credit card utilization low-at most, 30% to 40% of your credit limit.

- Mortgages. Many people assume that if the Fed lowers the interest rate, mortgage rates will also decrease. That simply isn’t the case, said economist Mark Vitner. He explained that mortgages are backed by mortgage securities, which aren’t doing well right now. Still, mortgage rates are hovering at about 6.45%, which is not nearly as high as in previous major economic downturns.

- Home equity lines of credit. This is an area where consumers may see some immediate relief, said Vitner. These loans are more closely tied to the prime rate, which moves in close concert with Fed interest rate cuts and hikes. “The interest cost on (HELOCs) will be less and make it easier on consumers. That frees up a little extra income for spending,” he said.

- Refinancing loans. Clearly, lower rates make refinancing cheaper. But determining whether this is a good option is a little more complex, said Jeff Williams of Allied Home Mortgage. If you have an adjustable home loan, it should be adjusting down, which is good and there is no need to refinance. But if you have an adjustable loan that is scheduled to reset at a much higher rate, refinancing may be a good option.

A number of banks are urging people to use the low rates as an opportunity to refinance into a 15-year or 20-year mortgage loan. But Williams said this may not be a good idea for everyone. He said that unless you are very secure in your job, it may be safer to stay with a 30-year loan, which typically has a lower monthly payment than a 15-year or 20-year loan.

- Car loans and personal loans. If you are shopping for new car or a personal loan, the lower interest rates will likely mean good news for you, said Vitner. “Lower rates means it’s cheaper to borrow money.”

- Saving accounts. Lower rates ultimately mean the money you earn on your savings will decrease. Now is a good time to shop around for the best rates. Hint: Online banks such as E-Trade Bank and HSBC Direct tend to offer higher returns on savings accounts and CDs than many traditional banks.

Good refinancing options are not the same for everyone. Job security should be taken into consideration when deciding as to how long you want to pay your mortgage.

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The choice between home and health

By Sarah Rubenstein , The Wall Street Journal

The housing market's collapse is forcing a growing number of Americans sitting on large medical bills to choose between paying the mortgage and paying the doctor.

People have long resorted to borrowing against their homes to pay for medical care in times of illness or after an accident. But with home values plummeting and interest rates on adjustable mortgages ratcheting higher, some indebted patients are at risk of losing their homes in order to pay for surgery, cancer treatment, drugs and other big-ticket medical expenses. Other patients are forgoing health care in order to keep from losing their homes.

Adding to the pressure is the weak economy, which has lost more than 1.2 million jobs so far this year. For many people, being laid off also means a loss of health insurance. Replacing that coverage on your own can be expensive, or may be difficult to obtain for people with pre-existing health conditions.

John Buckenroth of Bellefontaine, Ohio, had no insurance when he was diagnosed with a brain tumor in 2003. The 54-year-old former security guard qualified for Medicaid, the government insurance program for low-income people, and Medicare, the program for the elderly and disabled, which paid for most of his treatments. But to cover continuing drug costs, the family was forced to refinance their home.

"I'm scared to death," Mr. Buckenroth says. "I didn't know I was going to get brain cancer and not be able to work. You never know that."

Just how many people are being forced to choose between home and health care is hard to tell. Freddie Mac, the big government-sponsored home-loan investor, says illness appears to be a growing reason homeowners with some of the company's 12 million mortgages are falling behind in payments. Illness was the chief cause for 15% of Freddie Mac's delinquencies in the first half of this year, behind such reasons as loss of income and too much debt. Although that percentage is down from previous years, the actual numbers are higher because more people are delinquent on their loans.

Nationwide, more than 9% of mortgages on one- to four-family homes were a month or more overdue or were in foreclosure in the second quarter, according to the Mortgage Bankers Association. That compared with about 6.5% a year before and was the highest level since the association began such surveys 39 years ago.
Medical Debt Arrears

"Health-care costs are creating financial problems that lead to housing problems," says Mark Rukavina, executive director of the Access Project, a Boston-based research and advocacy group on medical debt. A biennial survey last year by the Commonwealth Fund, a nonpartisan research group, found that 41% of about 2,600 working-age adults had fallen behind on medical bills, up from 34% in 2005.

Consumer advocates generally urge patients not to refinance a mortgage or use home-equity loans to pay outstanding medical bills because of the risk of losing their homes to foreclosure. In contrast, medical providers typically must obtain a court judgment to put a lien on a patient's home, and they generally still won't get paid until the home is refinanced or sold.

Sometimes patients feel pressured. Kim Carpenter, of North Plainfield, N.J., says several collection agencies have pushed her and her husband to take out a second mortgage to pay off about $60,000 in medical bills from various hospital stays. They have resisted. Ms. Carpenter, a 49-year-old self-employed marketing consultant, says the couple continued adding to their medical debt even after taking out a new insurance policy, which cost nearly $1,000 a month, because it didn't cover pre-existing conditions during the first year it was in effect.

For Bowen Richards, a self-employed electrician in Cocoa, Fla., the weakening economy has added to his medical problems, cutting his income to about $22,000 so far this year from a normal $55,000 in years past. Mr. Richards, 52, lost the health coverage he had through his wife's work when the couple divorced, and he was rejected for his own insurance because of diabetes. Now, Mr. Richards has some $35,000 in unpaid medical bills because of complications from his disease. He tried putting off medical care to save money, but as a result, two toes got infected and needed to be amputated.
Selling a House

Mr. Richards put his house up for sale five months ago, but has had no takers. He is trying not to think about his medical debt. "I've been keeping up with my mortgage, my electric and my telephone, and then trying to get around so I can try to find work," he says.

Hospitals are often reluctant to take steps that would force patients from their homes, in part out of concern for bad publicity, says Chi Chi Wu, a staff attorney at the National Consumer Law Center. State homestead exemption laws often protect people's homes and a certain amount of the equity in them from being taken by anybody other than home lenders, she says.

Hospitals are generally more willing than banks to forgive debts or set low-payment terms. But for people who are having trouble making housing payments because of medical bills, it is sometimes possible to persuade home lenders to modify terms of the loan, especially if you provide adequate documentation of your medical bills, housing advocates say.


"I spend a lot of my time these days working on medical debt and access to health care, because that's what people need if they want to stay in housing," says Jane Walsh, a community organizer at Making Connections Louisville, a community advocacy group in Kentucky.

Susan Harris, 46, of Asheville, N.C., was self-employed and uninsured when she was diagnosed with a type of cancer called liposarcoma in 2003. She cashed out her 401(k) plan and gave the money to the hospital as part of an asset spend-down to qualify for Medicaid.
No More to Mortgage

But Ms. Harris still had $26,000 in hospital bills that Medicaid didn't cover, and she continued to build up additional debt because of out-of-pocket expenses. Last year, she refinanced her home and spent $28,000 on medical bills. Last week she had another operation to remove the cancer from her lung.

"I will once again be cancer free, but over my head in debt," she said prior to the procedure. "There's no more money in my house to mortgage it again."

Its a tough choice but one's health should always be the priority.

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How President Obama Will Deal With the Economy in 2009

By James Pethokoukis

As America's 44th president, Barack Obama will have one of the most challenging "to do" lists of any new Oval Office occupant in at least a generation. But before Obama can begin implementing the key aspects of his campaign's domestic agenda—increasing healthcare insurance coverage, improving education, dealing with climate change—he must try to kick-start a struggling economy that's sinking into terrible recession.

And he must do it as quickly as possible, given the worsening job market. Some sort of fiscal stimulus package might get passed when Congress returns from its autumn recess. But that will probably be merely an appetizer before the huge Democratic majorities in Congress send up a full-course meal of government aid to the new president soon after Obama takes the oath of office on Jan. 20, 2009. "Although our recommendation is a $300 to $500 billion package, our current expectation is only about $200 billion," explains economist Jan Hatzius of Goldman Sachs in a recent analysis. Such a package would most likely include infrastructure spending, financial aid to state and local governments struggling with lower property tax revenue, and tax rebates
to middle- and lower-income individuals. Would President Obama sign such a pricey bill, with Uncle Sam already facing a budget deficit of $1 trillion or more next year because of the $700 billion bank bailout? You bet. A rotting economy can be poison to any new administration, sapping it of public support.

But stimulus is only the first of many economic issues on Obama's presidential priority list. Others include:

Helping homeowners.  Wall Street got its megabailout, but what about Main Street? Many economists say that the plunging housing market and the deluge of foreclosures remain at the core of America's economic troubles and the credit crisis. During the campaign, Obama favored a 10 percent universal mortgage credit, but Daniel Clifton, an analyst with the Strategas Group, expects Obama to consider a range of options to bolster falling prices, such as an expanded home purchase tax credit, a moratorium on foreclosures, and "and potentially a large scale refinancing housing proposal." Among the various refinancing possibilities using Fannie Mae and Freddie Mac to refinance the mortgages of all the "underwater" homeowners whose homes are now worth less than their mortgages. That could cost $50 billion or more. Others have suggested refinancing everyone into mortgages with a low, low rate. That could have a $300 billion tab. Expect Obama do something, though. Word has it that his advisers have been reading up on the New Deal. One of FDR's first moves during the Great Depression was helping homeowners avert foreclosure.

Cutting some taxes, raising others.  Back in 1992, candidate Bill Clinton promised a big middle-class tax cut, but President Clinton never delivered. He instead focused on cutting the deficit. Don't expect such a switcheroo this time around. One of Obama's key criticisms of the Bush administration was that the middle class has seen a decline in its standard of living. With incomes flat or falling, the Democratic nominee explained, Americans were forced this decade to run up big credit card bills and borrow against their homes. Of course, who gets a tax cut—actually a refundable tax credit—is in dispute, with several different income ceilings being mentioned during the closing days of the campaign. One group that won't get a cut is households making $250,000 or more. Obama has promised to roll back the 2001 and 2003 investment- and income-tax cuts for those folks. Keep in mind, though, that a weak economy could provide reason to leave upper income-tax rates where they are until the Bush tax cuts expire at the end of 2010.

Creating jobs.  With the unemployment rate currently at 6.1 percent and predicted to rise to 7 percent or higher, Obama will also move fast to implement his energy  and infrastructure spending program, which is supposed create 5 million green jobs and ensure stronger economic growth into the future. He wants, for example, to invest $150 billion over 10 years to advance clean energy technology, as well as $10 billion per year for five years in a government-run, energy-themed venture capital fund. Then there is a $60 billion effort to shore up America's crumbling roads, bridges, and electricity grid. Obama advisers promise that despite the big budget shortfall, the jobs program will stay intact.



Fixing healthcare. Like the previous Democratic president, Obama has made healthcare reform a key part of his agenda. Though it may be one of the most complicated and politically dicey issues he has to tackle, look for Congress to quickly give him the opportunity to sign a renewal of an expanded version of the popular children's health insurance program. That would a first big step toward the full-scale revamp of the health insurance system that he has promised.

Picking an economic team.Who is going to help President Obama turn the economy around? Among his possible picks for Treasury secretary are former Clinton Treasury Secretary Lawrence Summers, former Federal Reserve Chairman Paul Volcker, New York Federal Reserve Bank President Timothy Geithner, and JPMorgan Chase CEO Jamie Dimon. Also expect his current top adviser on money matters, Jason Furman, to lead the White House economic team.

Obama is facing quite a challenge to be a good president.

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Financial crisis: What you should know

Crisis sparks confusion, questions about personal finance

By Allison Linn
Senior writer
msnbc.com

The financial crisis gripping the country had already created widespread confusion about what these problems might mean for ordinary Americans, and that was before a week of political bickering over a massive financial rescue package for Wall Street.

Hoping to calm a jittery public and win over some skeptics, a new version of the rescue package includes a provision that would increase the amount of money the Federal Deposit Insurance Corp. would insure in the event of a bank failure. That version passed the Senate Wednesday and was approved by the House of Representatives on Friday.

The House had voted down an earlier version of the bill, without the FDIC provision, earlier this week.

While the rescue package is expected to help deal with the financial crisis, experts have warned that tough economic times are likely still ahead. Here’s what else you should know about how the crisis might affect your personal finances.

Checking and savings accounts
News that major banks including Washington Mutual and Wachovia have been pulled down by the crisis has sparked fears about whether Americans should trust their banking institutions to stay solvent.

Most banks are expected to continue functioning normally. Still, it pays to take a few simple steps to protect your assets in the event of a bank failure.

First, make sure that your bank is backed by the Federal Deposit Insurance Corp., better known as the FDIC. Under the changes approved in the bailout package, if your bank is a member of the FDIC then the amount of money insured would increase to $250,000 until at least the end of 2009.

Under previous rules, individual accounts were insured for up to $100,000, and joint accounts were insured for up to $200,000.

If you bank with a credit union, make sure that it is insured under the National Credit Union Insurance Fund, which provides similar protections for credit union account holders.

Retirement investments
The FDIC also provides coverage of up to $250,000 for certain retirement accounts, such as IRAs that are held in FDIC-insured financial institutions. If you have more than $100,000, it pays to check out the FDIC's online deposit insurance estimator.

Brokerage accounts
While most of us expect to see gains and losses as a result of investing in the stock market, some have raised concerns about what happens if the company that holds your investments runs into trouble.

If you are concerned, check to see whether your firm is a member of the Securities Investor Protection Corp., or SIPC. Created by Congress in 1970, SIPC covers investors for up to $500,000 in the event a brokerage fails or securities are stolen.

It’s important to note that this does NOT protect people whose investment portfolios lose value because of drops in the market or bad investments. That’s because investing in stocks and bonds is considered to be a risky endeavor, with upsides and downsides.

“They’re not guaranteeing the value of the stock,” said Barry Ritholtz, chief executive of the research firm FusionIQ and author of the forthcoming book “Bailout Nation.” “They’re guaranteeing $500,000 against the company going belly up.”

Some brokerage firms also have supplemental insurance for certain investments, should their brokerage fail.

Money markets
Money market funds often have been considered a safe haven for stashing cash that you don’t want in riskier investments, such as stocks. Recent troubles at one large money market fund sparked concerns that even these investments — considered by some to be safe as cash —are not completely secure.

Hoping to quell the anxiety, the Treasury Department recently stepped in to provide guarantees for money market funds, using a Depression-era fund to back them.

Mutual fund firms, also, have taken steps to comfort worried investors, including disclosing money market fund holdings and posting information about their investment decision-making.

Russ Kinnel, director of mutual fund research with Morningstar, said the best way to assure that your money is safe in a money market fund is to choose a relatively large, low-cost fund from a large company. Those steps should make it less likely the fund will make riskier investments, and more likely that the firm itself will make investors whole should the fund “break the buck,” or fall below the target of $1 per share.

Consumer credit
For many Americans, the credit crunch that is a key factor in the current financial crisis has been a relatively abstract idea, affecting mainly large financial institutions. As the crisis unfolds, economists say we could start to see more of an impact on people’s everyday lives.

Consumers who are trying to borrow money for a new car or new home, for example, might  find it harder and more expensive to get a loan. Some might find it tougher to get a new credit card, said David Wyss, chief economist with Standard and Poor’s.

People who already have credit cards likely won’t see much change, although Wyss said some credit card companies are starting to reduce credit lines for riskier clients.

“They’re getting tougher on who they lend money to,” he said.

Business credit
Economists are watching closely to see if the credit crunch is going to make it harder for small- and midsized business owners to borrow money.

That, in turn, could crimp their ability to do business, leading to layoffs and affecting related businesses. It also could make it tougher for entrepreneurs to find money for starting new businesses.

Mortgages
The crisis on Wall Street shouldn’t have a direct impact on people who are paying their mortgages on time.

If you are seeking to refinance your mortgage or take out a second mortgage, however, you may find it to be more difficult, if not impossible, because of stricter lending requirements.

With the economy these days, lenders are being more strict to keep their businesses afloat.

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How a Sick Economy Contaminates the Housing Market

By Ilyce R. Glink with Samuel J. Tamkin

If you don't have a job, you're not going to be able to buy a house these days -- at least not unless you're paying cash.

The credit crisis continues to grow in scope and scariness. Add rising unemployment and a hotly contested U.S. presidential election, and it's no wonder that even the most optimistic real estate agents are quaking in their shoes.

You can say what you want about the economy, but all real estate is local. If your local economy has the sniffles, the local real estate market is likely to catch them, too.

More than 750,000 jobs have been lost in the United States in 2008. The unemployment rate last month was officially 6.1 percent. But some experts believe that the true unemployment rate is approaching 10 percent -- if you factor in those making less money than they were two years ago, those working part time but want to work full time, those who are underemployed, and those who have just given up looking for a job and have fallen off the rolls.

The connection between unemployment and a faltering real estate market is strong because lenders won't give you a mortgage now if you don't have a job with enough income to cover the payments.

The credit squeeze has reminded banks and mortgage lenders that credit scores, while perhaps good predictors of whether people have the desire and financial stability to repay a mortgage, don't actually pay the bills. They don't take into account whether someone has a lot of cash on hand for emergencies or is just making ends meet. A medical emergency, job loss, divorce or death can disrupt the best-laid plans.

However, if you have a job and have maintained a good credit score, the time is coming when you may want to talk to your lender about refinancing.

First, for those who have adjustable rate mortgages tied to U.S. Treasurys, your ARM may reset lower than its current rate, perhaps even in the 4.5 percent range. (Yes, you read that right -- around 4 percent.) How could this happen? If one-year Treasurys are at 1.5 percent and you have a three-percentage-point margin attached to your loan, that adds up to a 4.5 percent interest rate.

If you have an ARM tied to some other indexes or an interest-only loan, some lenders are offering to lock in rates for a small fee of $250 for the life of the loan, or for the next five years. Find out when and at what interest rate your loan will adjust, and then see what it would cost you to convert your ARM to a fixed-rate loan. This could be a great deal, especially if you're sick of not sleeping at night.

Q. I'm wondering if it would be easier to sell our house if we offer owner financing. How risky is that? What about all the legalities? We have a real estate lawyer. Will we need anyone else to help us with the documents?

A. You can arrange owner financing through your lawyer or through a loan-management Web site such as VirginMoney.com.

To determine your risk of default with your potential buyers, you need to interview them and determine what kind of people they are, what type of a jobs and income they have, and the odds that they will continue to be employed. You need to look at their credit histories to see if they have a record of paying their bills on time. Once you sell the home, you will be like their bank. If they default, you will have to foreclose on the home to get it back.

Obtain a credit report on the buyers from at least one, and preferably all three, of the major credit reporting bureaus. You will want complete credit information on each buyer (husband and wife, or partners) who will be listed on the mortgage.

What you have to think about is this: People with bad or even mediocre credit can't get loans easily at the moment. But interest rates are still low. If you want to take on someone with a perfectly awful credit score and not charge that much in interest, you might want to instead find someone good who is just momentarily down on his or her luck.

Or you might get someone who does the deal, moves in, trashes the house, strips it clean and moves out. Yes, you get back the property, but now you have to clean it and find someone else to buy it.

This kind of thing works if your buyers have cash to put down on the home. Ask for a big enough cash down payment that the buyers would be unwilling to walk away. Sometimes you'll want 30 percent or even 40 percent of the purchase price. (The lower your buyers' credit score, the higher the down payment you should require.)

But in many cases, sellers don't ask for a large down payment or buyers don't have it. Now you have to assess a new risk: If your buyers put down very little money, your risk in having a buyer with almost no skin in the game in the current market environment might be quite a bit higher than the buyers' risk of losing a small down payment.

Your real estate lawyer can walk you through the process if you decide to move forward, but I would tread carefully.

Q. I have been renting a house for seven years. The owner has refinanced the house two times as owner-occupied. Is this against the law?

A. When you fill out a mortgage application, the lender asks you if this is going to be an owner-occupied property. If you answer yes, you are telling the lender that you intend to move into the property and live there as your primary residence. If you answer no, then you are signaling that this will be either a second home or an investment property.

Owner-occupied properties can get financing at a lower interest rate than investment properties, which typically are charged not only a higher interest rate but also additional fees. Some of the millions of investors who bought investment properties in recent years tried to save money by claiming that the homes were going to be owner-occupied -- even though they knew they weren't going to live there.

You're supposed to fill out the application truthfully. Any time you put anything down on a mortgage application that isn't true, you may be committing fraud.

However, even if you indicate that the property is going to be owner-occupied, plans can change. Just because you get an owner-occupant mortgage doesn't mean you cannot move into that home and later rent it out. It just means that when you close you are supposed to move into the home and treat it as your primary residence. You are usually required to move into the home within 30 to 60 days of the settlement.

It would seem that if the owner lives in part of the property and you rent out another part, then he would be entitled to refinance with an owner-occupied loan. If you have lived there for seven years and the owner doesn't live on the property or in another part of a two- to four-unit building, then perhaps not.

I wonder how you know that the owner has been refinancing and under what circumstances, and how you know that he told the lender that he was obtaining financing by claiming the property was owner-occupied. Still, if the owner has been paying his mortgage on time and in full each month, most lenders won't care. They have a lot of other things on their plates.

It's tough to say whether the owner broke any laws in claiming that the property is owner-occupied when he knew it was not. That would depend on the documents signed by the borrower, the laws in the state in which the property and the owner are, and the federal banking and mortgage laws.

Q. We have lived in our house since 1989. My husband was recently disabled. I have become his full-time caretaker, which means I'm not able to work as much. We're having trouble paying our mortgage.

My daughter suggested assuming the mortgage to our house. She has been paying the mortgage since spring and will continue to do so. We checked with my mortgage company, and they said we can do a "simple assumption."

What do you think about that? If we do a simple assumption, her name can be added to the deed and the mortgage. Right now, only my husband's name is on the deed. We wonder what we need to do to take his name off the deed (I have power of attorney for him because he can't make decisions any more) and add myself and my daughter.

What do you think? We are not sure if this would be the right way to go. I was advised not to give the house to her.

A. Typically, it's best not to give a major asset such as a house to a child because there are tax ramifications on both sides. On your side, you may have to file a gift-tax form with the IRS, and the value of the gift (in this case, the value of the house) is subtracted from your and your husband's lifetime gift-exemption total of $1 million. On your daughter's side, she would receive the gift at your cost basis. That means that when she sells it, she will pay taxes based on the difference between the price at which you bought the home and the sales price down the line. Depending on what long-term capital gains taxes are at the time, the tax could be hefty. (Right now, long-term capital gains taxes are capped at 15 percent plus state tax; they were once as high as 28 percent.)

But you're in a difficult situation. If I were your daughter, I would want to make sure that my name were on the house if I were assuming the mortgage. But this may limit her ability to buy another property down the line because her credit would be tied up with this property. Moreover, the lender may not allow her to assume the loan without putting her name on the deed as some security.

Another option might be to have her continue to pay down the loan, and transfer a percentage of title to her in chunks over time.

One issue that occasionally comes up in these circumstances: A child who gains title to the property turns around and evicts her parents. For this reason, I would not have her replace your husband on the title. Instead, you and she should be added to the deed so that she owns at most one-third of the property and you and your husband retain ownership of the rest.

You should really talk with an estate planner or estate attorney who can help you sort through these circumstances and figure out how to make this work. There may be other options that suit your needs and the needs of the family much better than just adding your daughter to the title.

Q. I'm a contractor who has completed repairs on a house that was damaged by fire. The homeowner's insurance company sent the insurance-proceeds check to the owner's mortgage company. The mortgage company has paid me for the first part of the work.

I was almost through with the job, and the mortgage company sent out its inspector, and he wrote that the job was 95 percent complete. The only thing needed was the carpeting. The mortgage company said that it would release the final balance of the money to me.

But the house is in foreclosure, and now the mortgage company refuses to pay me the money that the insurance company gave for the repairs. How do I go about getting my money?

A. As a contractor, you may have rights under state laws. Those laws generally give you the right to a lien on the home for unpaid money due or work performed on the home. Those laws are generally referred to as mechanic's-lien laws.

In addition, all states have foreclosure laws that govern the process that a lender must take to sue a homeowner for amounts that are unpaid on a home loan. Those foreclosure laws in turn dictate what a lender must do and how a lender will get paid. This process also will include a mechanism to take care of other lienholders.

The first question to answer is "Who hired you?" Were you hired to make the repairs to the home by the owner of the home or the mortgage company?

If the mortgage company hired you, you can file a mechanic's lien against the home for the unpaid balance owed to you for the work you completed. You may also have to sue the lender for payment for the services rendered to the lender.

If the homeowner hired you, you may have a bigger problem. While you can file a mechanic's lien against the home, you will have to protect your interests in the value of the improvements you put into the home by joining in the foreclosure proceedings to claim your money.

When a mortgage lender gives a buyer a loan (or a current owner refinances), the lender wants to make sure that its mortgage is a the top of the food chain when it comes to liens. That way, in the event of a foreclosure, the lender can get all or much of the proceeds from the sale of the home to pay off the loan.

However, in certain circumstances -- and you may fall into this category -- foreclosure laws can have exceptions, particularly where a contractor has improved the home and the judge decides that the contractor should get paid for that work ahead of the lender.

You should immediately consult with a lawyer who has plenty of foreclosure and lien experience to protect your interests in the foreclosure case. Depending on your state, you may come out fine.

Q. My father bought three acres of land that he paid for with his own money. The property was titled in his name as a "single person" along with my cousin and my cousin's wife as "a married couple." Everyone was listed as joint tenants with right of survivorship.

My father later severed the joint tenancy to tenancy in common. Recently, he quitclaimed his interest to me. I bought a title insurance commitment on the lot, and it was reported to the county by stating that I, my cousin and my cousin's wife own the property as tenants in common.

Do I own one-third of the lot or one-half?

A. Unless the documents specifically designate the percentage owned by each of you, under many state laws, you will all be deemed to own the property in equal shares. That would mean that your father, your cousin and your cousin's wife might have all owned one-third shares of the property.

You, in turn, would own a one-third share in the land.

However, if the documentation shows that your cousin and his wife got a one-half share of the property in the document that severed the joint tenancy, you would own a one-half share.

In general, joint tenancy with rights of survivorship assumes that each owner of the property is an equal owner. That said, later documentation can break joint tenancy and the parties can decide how to hold title to the property and in what shares.

The key to your question will be how your father broke the joint tenancy. If the owners all got together and broke the joint tenancy by signing a new deed, you need a copy of that deed to see what language they used to convey title from all of them to all of them.

At that point you can determine if you own one-third, one-half or some other percentage.

These are tough times. We have to be creative in getting more income to be able to afford necessities such as housing.

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Mortgage showdown among hard choices for 30-somethings

For Angie and Jason, keeping the house is Job 1. And like many homeowners these days, they face a daunting challenge. When the interest obligation on their adjustable-rate mortgage resets next year, their monthly house payment could rise to as much as $5,348 from $3,450, based on today's rates.

With the value of their house down nearly 10% since they bought it, refinancing will be difficult. If they can't refinance into a fixed-rate loan, they should try to negotiate a new loan with their lender, who may be willing to cooperate to avoid yet another foreclosure. If that fails and they end up with the bigger mortgage payment, they should scour their household budget for ways to cut costs.

They need to invest their brokerage account fairly conservatively so it can provide a backstop in case they're in danger of missing a monthly house payment. (It's probably premature to consider trading down to a smaller house -- and mortgage payment -- at this point and might not make financial sense anyway given the current turmoil in the housing market.)

Once the mortgage situation stabilizes, the couple's priority should be paying off their credit cards, then setting up low-cost 529 college savings accounts for their kids. (Gagne recommends plans offered by the state of Utah that combine good investment choices with low costs.)

If possible, they should continue contributing to their 401(k) plans (allocation: 65% stocks, 15% hard assets, 20% bonds), even if it means ratcheting back their children's educational expectations. It provides a valuable tax break, and getting a jump on retirement saving is essential.

Ideally, Angie and Jason should each up their contributions $5,500 a year to the legal maximum, but that's probably not realistic given the challenges they face on the home front.

Angie and Jason

Angie, 36, and Jason, 38, are married with two children, ages 4 and 6. Angie sells Internet advertising, and Jason is an independent film producer. They own a three-bedroom house in Culver City.

Assets

* 401(k) plans: $30,000

* Bank savings account: $8,000

* IRAs: $15,000

* Brokerage accounts: $75,000

* House: $800,000, down from $875,000 purchase price in 2003

Debt

* Mortgage (5.75% interest-only ARM; rate adjusts starting next year): $700,000

* Balance on home equity line of credit (5.8%): $25,000

* Credit cards (12%): $10,000

* Two auto loans (5.9%): $25,000

Annual combined income

$165,000

Annual savings

* 401(k) plans: $10,000 each

* Brokerage account: $10,000

Objectives

* Deal with higher mortgage payments

* Get a handle on spending

* Save for kids' education

* Develop long-term investment and retirement strategy


Life is tough. People have to plan their finances carefully.

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Critics slam McCain housing plan

John McCain’s surprise policy offering Tuesday night to have the government buy bad mortgages is bold, sweeping and, well, a bit perplexing to nearly everyone.

From economic experts to political pundits, from liberals to conservatives, the proposal has been greeted with a collective sense of puzzlement that is raising questions not only about the substance of the plan, but of the seeming hastiness surrounding its rollout.

The few details available about McCain’s American Homeownership Resurgence Plan give the impression the plan is “half-baked,” according to Larry Sabato, director of the University of Virginia’s Center for Politics.

“If you’re launching a major new initiative, usually you blitz the cable networks and really try to penetrate the public consciousness. I didn’t see that today,” he said Wednesday.

“It would really frighten me if he actually thought this was good policy,” said Dan Mitchell, a senior fellow at the libertarian Cato Institute. “I assume that it’s nothing but a desperation ploy” to show they are doing something “big and bold,” he said.

“It seems hastily put together … given the lack of detail, specificity and overlap with existing programs,” added a Republican financial services lobbyist.

Indeed, McCain’s announcement was accompanied by a fact sheet that raised almost as many questions as it answered. The campaign did post and e-mail a background document Tuesday night following the debate describing the plan, but it lacked specifics about how the program would work, exactly who would be eligible and how many people would be helped.

The ambiguity — and McCain’s failure to return to the subject and further elaborate on the initiative in the debate — afforded Democrats an opportunity to dismiss the plan right out of the gate.

Obama supporter Sen. Claire McCaskill (D-Mo.) told Fox News after the debate it felt “a little bit like another Hail Mary.”

The McCain campaign tweaked the document overnight Tuesday in a slight but very significant way, removing a single sentence that indicated the government would buy mortgages from lenders at a discounted rate.

The McCain campaign said the plan did not change and they merely edited out “language [that] was mistakenly included in the initial draft.”

Nonetheless, with the sentence gone, the plan morphed into a shifting of $300 billion worth of losses to the taxpayers. It became clear Wednesday as the campaign talked about the plan that McCain is proposing that the Treasury purchase bad mortgages at face value even though sliding home prices mean many homes are worth far less than what the government would pay for original mortgages.

The plan is to retire the original mortgage and issue the homeowner a new, 30-year fixed-rate loan at interest rates just above 5 percent from the Federal Housing Administration. The shortfall between the new mortgage and the cost of the older, more expensive one would come from taxpayers.

The new detail caused many experts to question whether the $300 billion price tag is too low.

And while the McCain campaign pitched the plan as a fast-acting solution, some experts said that the administration of a homeowner-by-homeowner program would be extremely complicated — and therefore likely slow-moving — and much more cumbersome than dealing with larger institutions.

A campaign conference call with reporters Wednesday morning revealed that the campaign still doesn’t have all the details worked out.

When asked how many people the plan would help, McCain economic adviser Douglas Holtz-Eakin responded that it could aid “literally millions” but they didn’t have a precise estimate. “The question is how many people are going to pick up the phone.”

Holtz-Eakin offered only broadest description of who would qualify for the refinancing program.

“They need to be in a position where they’re going to be unable to stay in the mortgage,” he told reporters, saying that includes a homeowner who is “underwater” in their mortgage — owing more than the home is currently worth — or facing a future rate reset that would make their payments unaffordable.

“We’re going to roll out the specific criteria. We’re trying to get sign-offs from the senator on all the details,” Holtz-Eakin told Politico in a later interview.
When asked when McCain decided to embrace this new housing initiative, Holtz-Eakin said the idea has been evolving since March.

“We’ve had different versions of our housing plan, and we’ve watched the economy and the financial markets evolve, and he has decided it was time to go with the aggressive option,” he told Politico.

Holtz-Eakin demurred when asked for more specificity about the exact timing of McCain’s decision, saying, “We don’t discuss the internal advising and decision making.”
The editorial board of the conservative National Review magazine on Thursday rapped McCain for not detailing the borrower criteria, expressing skepticism that he could help “millions” without lowering standards to reckless levels.

An earlier proposal championed by Rep. Barney Frank (D-Mass.) to stem foreclosures — a plan the magazine opposed — “looks downright prudent compared to what McCain has proposed,” the editors wrote. The Obama campaign gleefully e-mailed the editorial to reporters.

“Without specifics as to what they plan on doing and how they plan on acquiring [the mortgages], it’s hard to mesh the various numbers that are being pushed around,” said Andrew Jakabovics, a housing expert at the Democratic-oriented Center for American Progress.

In March — the start-date of his evolution on the subject — McCain gave a major speech on the housing crisis, the first comprehensive articulation of his views. While several Democratic primary contenders had offered proposals to aid struggling homeowners, McCain counseled against strong government intervention and offered a harsh assessment of the role of borrowers in creating the mess, as well as lenders.

“[I]t is not the duty of government to bail out and reward those who act irresponsibly, whether they are big banks or small borrowers. Government assistance to the banking system should be based solely on preventing systemic risk that would endanger the entire financial system and the economy,” he said.

Less than a month later, McCain outlined his HOME plan, which would help certain subprime borrowers refinance into affordable fixed-rate loans, though he continued to insist that no taxpayer money should go to help speculators or market participants who failed to perform their “due diligence.”

The HOME proposal looked very similar to one being hammered out at the time by congressional Democrats, led by Frank. The congressional version, which allowed the FHA to refinance up to $300 billion worth of mortgages, became law in late July.

McCain did not offer his "Resurgence" plan or any new proposals during negotiations on the $700 billion bailout.

McCain now believes the crisis is such that the government needs to reach more homeowners than the congressional program, said Holtz-Eakin. Experts expect that plan to only help about 400,000 homeowners.

“We just think that as conditions have evolved, we’ve got to have a more effective program,” he said.

Having the government buy original loans and refinance them directly “will be a much quicker process” than the congressional program, he said. “It will also be broader in scale because it won’t require the voluntary participation [of lenders], and it will be more effective in stabilizing financial markets.”

The McCain plan also relies on existing powers — including the $300 billion refinancing authority granted in the congressional bill — and therefore wouldn't require new legislation.

In contrast with McCain’s plan, however, that congressional program requires lenders and mortgage investors to reduce the mortgage principal to about 90 percent of the home’s current value, thereby taking a pretty significant loss on the loan.
Lawmakers contended that the arrangement protects taxpayers and reduces so-called “moral hazard” — the risk that government intervention would lead lenders to believe they would always be rescued from their bad business decisions. To make sure homeowners weren’t let off the hook, the law required them to share any future profits from the resale of their homes with the government.

“Clearly we face the tradeoff that we would in fact be taking the negative equity position and putting it on the taxpayers’ books instead of putting it on the private lenders’ books or the homeowners’ books,” Holtz-Eakin said. “We think the balance of risk has shifted to the point where this is the way to go.”

Sabato said McCain’s housing surprise fits within a larger pattern of trying to gain traction as the market woes dominate the campaign.

“They’re lurching from one subject to another hoping to change the subject from the economy, or from the Democratic aspects of the economic crisis. That’s all,” he said
Some observers, however, see real merit in the proposal even if they weren’t the loudest voices Wednesday.

Conservative financial scholar Alex J. Pollock of the American Enterprise Institute said he was not bothered by the lack of specifics at this stage.

"Ideas go from the general to the specific, not the other way around,” he said.

And while he isn’t ready to judge the merit of McCain’s proposal, he is one conservative who supports the general proposition that lenders and borrowers need a bailout.

“When you get into the bust and the panic, you have to do things that you’d rather not do, and that’s where we are. And I think that’s what Sen. McCain has understood with this proposal.”

Victoria McGrane

Lisa Lerer contributed to this report.

I guess John McCain had his reasons.

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Big homeowner rescue program kicks off

Carolyn Said, Chronicle Staff Writer

While Washington works on the sweeping bailout package, another big-bucks congressional rescue plan went into effect Wednesday.

The Hope for Homeowners program, or H4H, passed as part of a housing reform bill in July, authorizes the Federal Housing Administration to help troubled homeowners refinance into 30-year fixed-rate mortgages.

The actual refinancing would be done by lenders, who must take a big "haircut" - writing down loans to 90 percent of a property's current appraised market value. The FHA would act as the mortgage guarantor, paying lenders the unpaid balance if a loan goes into foreclosure. It can insure up to $300 billion worth of such loans over the next three years, although the agency said it does not expect to reach that cap.

The program could help 400,000 families, according to the Congressional Budget Office. But the office also says 35 percent of those families are likely to end up defaulting on their mortgages anyway.

It's totally up to lenders whether they want to participate in the program, but some experts said they expect banks to be gung-ho about the chance to dispose of soured mortgages.

"Lenders love this as a way to get rid of illiquid debt," said Dick LePre, a senior loan officer with Residential Pacific Mortgage in San Francisco. "They see this as a godsend - please refinance these loans, get 'em off the books - because they can't sell them."

Rick Harper, a former bank president who is now vice president and director of housing at the Consumer Credit Counseling Service of San Francisco, which advises about 2,500 struggling homeowners each month, agreed that lenders will want to participate.

"You would think that in a declining market, if (a lender) had a willing borrower who could qualify for that FHA refinance, that it would stop the bleeding by writing off its loss," he said.

Mortgage giant JPMorgan Chase & Co. responded to a request for comment on the plan by sending recent congressional testimony about the H4H program by Molly Sheehan, its senior vice president of home lending. Sheehan said Chase, which owns or services $845 billion in home loans, believes about $2.5 billion of its loans, or about 14,000 households, may qualify for the program.

However, she expressed some reservations, including the fact that first-mortgage lenders do not get to share in the home's future appreciation. (Second-mortgage lenders do get a slice of future appreciation, as a way to encourage them to release their liens.)

Here's how the program works:

Cost: H4H has a built-in mechanism to raise insurance funds to cover foreclosures. Borrowers pay a 3 percent premium up front plus 1.5 percent a year. That's quite a bit pricier than the standard FHA 1.5 percent up front plus 0.5 percent a year premiums.

The initial 3 percent could be rolled in as part of the refinance, but the 1.5 percent a year effectively means that borrowers will end up with an interest rate around 8 percent (assuming the loan itself is at 6.5 percent). The 1.5 percent premium ends when the homeowner accrues a certain level of equity, but in a declining market, that's likely to take a very long time.

"Congress set the fees so high because they anticipated a high default rate," said Bill Glavin, special assistant to the FHA commissioner. "This will help our insurance fund."

No liar loans: All FHA loans must include full documentation of income and employment. Anyone who falsified information to obtain their previous mortgage is supposed to be barred from this program. Won't that exclude the hordes of people who took out "liar loans," swearing they were rolling in dough?

Not necessarily. "It's up to the lender to make that judgment (if a borrower previously lied); all they should focus on is if they're now telling the truth and make $30,000 a year, is whether they can hack the mortgage at $30,000," Glavin said. "They can't get away with falsification of income this time."

Income qualifications: Borrowers can participate only if their total housing costs - principal, interest, taxes and insurance - end up as less than 31 percent of their total income (it rises to 38 percent if they successfully complete a three-month trial at the new rate). Their total debt may not exceed 43 percent of income (or 50 percent after the trial).

Glavin agreed that requirement may disqualify a lot of people.

Harper said he thinks two-income homeowners would have the best chance of meeting the qualifications. Many Bay Area homes may be too pricey for the program but nationwide many homes are now at such low valuations that an H4H refinance will work for them, he said.

Securitization: The big stumbling block for many loan modifications is that the bank that collects payments often doesn't own the mortgage - it acts as a servicer on behalf of investors, who own securitized mortgages that were sliced and diced into packages for sale. Those investors' agreement often is needed to refinance a mortgage. Glavin said it is possible investors will not agree to do it, and that contacting them could prove to be cumbersome.

Dumping toxic loans: What will stop lenders from putting their worst mortgages into this program to get rid of them?

Glavin said the verified income requirement means only qualified borrowers will get a refinance.

"Most lenders, if they're going to originate a new loan, they still don't want to make a bad loan, even if in the end the homeowner defaults and we pay a claim," he said. "It's not as if the lenders will go out and continue to work with a borrower who does not perform well."

Hope for Homeowners plan

How it works

-- Lenders write down loan balance to 90% of current appraised value.

-- New loan is 30-year fixed at current rates (about 6.5%).

-- Borrowers pay 3% up-front insurance premium (can be financed as part of the loan).

-- Borrowers pay 1.5% a year as insurance premiums.

-- Housing costs can't exceed 31% of borrower's income or 38% if borrower successfully completes 3-month trial period.

-- Total debt can't exceed 43% of borrower's income or 50% after three-month trial.

-- Second mortgage holders must release their liens.

-- New loan is guaranteed by FHA.

Who qualifies

-- Owner-occupants who cannot afford their current loan and do not own a second home.

-- Borrowers must fully document their income.

-- Borrowers must agree to share future appreciation in their home.

How to participate

Interested borrowers should contact their lender, a HUD counseling agency or the HOPE Now Alliance at (888) 995-HOPE.

Full details at www.fha.gov


Example

House was purchased for $450,000 and now appraises at $300,000.

New loan at 90% of value is $270,000 (lender writes off $180,000 plus the 3% insurance fee)

New monthly payments are about $2,500 (6.5% interest plus 1.5% insurance plus about $400 a month for taxes and insurance)

Income to qualify: at 31% debt-to-income: $7,740/month, or $92,900/year

At 38% DTI: $6,315/month or $75,790/year

Yes, there is hope in paying off all those mortgages.

Source: Federal Housing Administration

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As Rates Fall, Is It Time to Refinance?

Peter McDougall

After the real estate industry -- and its related securities -- almost deep-sixed Wall Street, it's hard to imagine there would be a silver lining: A five-week decline in 30-year fixed-rate mortgages has spurred a surge in refinancing, according to the Mortgage Bankers Association.

Refinancing has more than doubled since August, according to the trade group. Does refinancing make sense given current economic conditions? For some, it does. Swapping an adjustable-rate mortgage, or ARM, for a fixed rate, or FRM, is often a smart move -- especially now, when interest rates are relatively low. But for homeowners already holding FRMs, deciding whether to refinance depends on how much can be saved.
The first step is to make sure you're not "upside down" in your mortgage, that is, you don't owe more than your house is worth. In some parts of the country, slumping prices have made refinancing difficult, or impossible, because homeowners who bought at the peak of the market owe more than the current assessed value.

Next, check the numbers. The key is to make sure the amount you'd save on monthly mortgage payments would outweigh the amount you spend on closing costs. To see how a new mortgage at today's rates would compare with your existing mortgage, take a look at the Refinance Interest Savings calculator from BankingMyWay.com. Just enter the details of your current and future mortgages along with the cost of property taxes and homeowner's insurance.

Let's walk through a sample refinancing calculation: Say you bought your house 10 years ago with a $200,000 30-year FRM at an interest rate of 8%. You currently pay $3,000 a year in property taxes and $900 a year in homeowner's insurance, and your home is worth $250,000, based on your lender's assessment or a price comparison based on similar homes in your area that have been recently sold. The remaining balance on your mortgage (as indicated by the calculator) is $175,449, so you aren't upside down. If your lender offers a 15-year FRM at the current rate of 5.35% with $4,000 in closing costs, you could end up saving just under $48 on your monthly mortgage payment. But along with the lower interest rate, you've also cut your loan period by five years, which will save you $96,672 in interest payments over the life of your new loan.

It is a good idea for the term of your new loan to match (or be under) the remaining years on your existing loan. If you refinance instead with a 30-year loan, your monthly payments would be much lower than on the 15-year loan, but you would end up paying a lot more in interest because of the longer payout period. What's more, by shortening the time frame of your loan you'll build up equity in your home quicker. After just five years with the new 15-year loan, you'll have about $22,000 more in home equity than after five more years with your existing loan.

You should also consider how long you plan to stay in your existing home: It's generally not a good idea to refinance unless you'll stay long enough to break even on closing costs. The report from the Refinance Interest Savings calculator provides details of savings as well as the estimated break-even point. In the above example, it would take seven years for the $48 monthly savings to pay back the $4,000 in "refi" closing costs. If you think you'll move before then, you may want to think twice about refinancing.

Refinancing may be a good option for some but it is not something that everyone should get into. You have to evaluate your situation first before having it.

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Homeownership Mission Vulnerable After Rescue

By Binyamin Appelbaum and Renae Merle
Washington Post Staff Writers

The suspension of Fannie Mae and Freddie Mac as private enterprises means the federal government can no longer require them to spend shareholders' money on affordable-housing programs. Now the government must decide how much of its own money to spend.

Some checks are already being written. The Treasury Department last week began issuing millions of dollars in "Hope bonds" to fund refinance loans for homeowners facing foreclosure. Fannie Mae and Freddie Mac were supposed to pick up the tab. Now it's on the government.

Some spending decisions are reversible. Congress this summer created an affordable-housing trust fund, to be filled with money from Fannie Mae and Freddie Mac beginning in 2010. Affordable-housing advocates, who fought for years to create the fund, now wonder when it will see the first dollar of funding.

But the overarching question is about the future of the companies' founding purpose and long-standing mission to promote homeownership for lower-income families.

Regulators have made clear that they see Fannie Mae and Freddie Mac as essential to the health of the whole mortgage market, not just the lower end. James B. Lockhart III, director of the Federal Housing Finance Agency, barely mentioned affordable housing Sunday as he described an eight-point plan for the companies. Instead, he chose to underscore a broader mission: "the critical importance each company has in supporting the residential mortgage market in this country."

That has affordable-housing advocates wondering whether affordable housing will be seen as an expendable luxury in a drive to restore the two companies to profitability as soon as possible.

"Our concern is that the rhetoric has been about preserving the global financial system," said Mike Shea, executive director of Acorn Housing. "There has not been a whole lot of rhetoric about preserving homeownership."

Fannie Mae and Freddie Mac were created by the federal government to make mortgage loans less expensive and more available. They enjoyed indirect financial support from the government in exchange for focusing their efforts on making mortgages affordable for lower-income families.

As they became highly profitable, they felt increased pressure from Congress to invest directly in affordable housing. The resulting programs include the classic philanthropy of grants to community groups and the complicated wizardry of low-cost financing for apartment construction projects.

Two of the companies' largest obligations were created this summer by the same legislation that gave the government the power to take them over. When the government assumed control of the firms, it also took over the obligations.

The more immediate of the two obligations arises from a deal the government struck with lenders: If you, the lenders, agree to write new mortgage loans for borrowers reflecting the current value of their homes, we, the government, will promise to repay those loans even if the borrower cannot. Fannie Mae and Freddie Mac were going to cover the cost.

The government said it would guarantee up to $300 billion in such refinance loans over the next three years. The Congressional Budget Office estimated the cost of the program at about $729 million.

Beginning next year, Fannie Mae and Freddie Mac were to have paid the government 4.2 cents every time they bought $100 in new loans. The government could still collect those fees, but now that's just bookkeeping. Fannie Mae and Freddie Mac are on the government's tab.

A spokesman for the Department of Housing and Urban Development, which will administer the refinancing program, said the department was committed to starting the program Oct. 1.

The second obligation is an affordable-housing trust fund, a pot of money long sought by housing advocates that will be distributed to states to support the creation and preservation of low-cost housing.

The money was to come from the 4.2-cent fee: As the refinancing program winds down, funding would be diverted to the housing trust fund, beginning in 2010. Advocates say they think Fannie Mae and Freddie Mac will be back on solid ground before then but are also eager for Congress to designate other sources of funding.

"We're optimistic," said Sheila Crowley, president of the National Low Income Housing Coalition. She cited the strong support of Rep. Barney Frank (D-Mass.), chairman of the House Financial Services Committee, for the trust fund. Frank's office acknowledged that support but noted that Lockhart has the power to suspend contributions in the financial interest of the companies.

Some advocates see reason for concern about the administration's intentions. They note the decision by regulators in April not to punish Fannie Mae and Freddie Mac for failing to meet their affordable-housing goals in 2007.

The companies' regulator at the time, the Department of Housing and Urban Development, accepted the companies' argument that they were ailing financially and therefore unable to meet the goals. The advocates worry the government will put the companies' financial health ahead of policy goals.

But a vocal part of the affordable-housing community has long criticized the two companies for failing to support affordable-housing programs. They note that Fannie Mae and Freddie Mac chose to invest in subprime mortgages -- loans that often allowed people to buy homes they could not afford -- rather than truly affordable mortgages.

"They have not really done affordable housing. That's been the problem," said Judith Kennedy, chief executive of the National Association of Affordable Housing Lenders. "If they had done legitimate affordable housing, they wouldn't be in this mess."

Other advocates see the takeover as an opportunity for Fannie Mae and Freddie Mac to push a systematic restructuring of loans for distressed homeowners. It could be an opportunity for Fannie Mae and Freddie Mac to set an example, said Bruce Marks, chief executive of the Neighborhood Assistance Corp. of America. "That means [Treasury Secretary Henry] Paulson doesn't need to be begging servicers to restructure. Now we can do it through Fannie and Freddie, and that will become the national standard," Marks said.

The companies have funded nonprofit groups, something an arm of the government may be less likely to do.

NACA received $3 million from Fannie Mae last year and $500,000 from Freddie Mac, helping the Boston-based nonprofit hire more housing counselors. Consumer Credit Counseling Service of Greater Atlanta received a $250,000 grant from Fannie Mae this year for outreach efforts after noting that a disproportionate number of Hispanic homeowners were facing foreclosure.

The issue is a particular concern for the District because Fannie Mae is headquartered here and has long focused its affordable-housing efforts on its home town. Now the concern is that the District has lost its largest Fortune 500 company, replaced by one more federal agency.

"We do not have many sources to make up for what Fannie Mae has done here," said Del. Eleanor Holmes Norton (D-D.C.). "We are not a corporate headquarters city, to say the very least."

The first dollars of funding from the housing trust fund couldnt come soon enough.

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Home Loan Rate : What are the Variables that Affect the Rate

There are many factors that determine the home loan rate that you will be charged on a new or refinancing mortgage loan. Knowing and understanding how each of the variables affect the interest rate will help you to make the best choice of loan.

By Julian Lim

Type of loan

The type of loan that you select has a significant impact on the home loan rate. A variable rate loan may start out at a low rate and quickly escalate to a much higher rate. In fact, this is one of the major reasons why homeowners find themselves in trouble when they purchase a home with monthly payments that are at the limit of their personal affordability and then the payments increase because the interest rates increase. A fixed interest rate may cost slightly more than a variable loan to begin with, but you know what the rate will be in two years.

Economy

The economy of the nation has an impact on the home loan rate, particularly if the loan as a variable rate loan. Often the loan rate is tied to the prime interest rate plus a certain number of points. Of course, when the economy is slowing down, loans are somewhat harder to get and the qualifying process may be more stringent. When the economy is booming and loans are easy, more people can qualify to get a mortgage loan because the restrictions are less onerous. People are more willing to take a chance on a larger loan when they feel positive about the state of the economy.

Credit score

When applying for a new loan, the loan broker will almost always check the credit score before deciding what the home loan rate will be. The higher the credit score of the potential borrower, the better deal can be put together with the broker. Conversely, if the credit score is low or if there is little credit history, the loan is likely to cost more or require a higher percentage of the total as a cash down payment. Careful attention to making mortgage payments in full and on time will allow the borrower to create a new a better credit history so that a refinance later will have a better rate.

Loan Term

Theoretically a loan can be for any length of time, and this factor is one that many potential borrowers don't think about. They just assume the best home loan rate will be at a 30 year mortgage term. Even conventional loans can be taken for 15 years, 20 years or 25 years. Shorter term loans cost much less in interest over the term of the loan, so even at a higher monthly payment and the same interest rate, the shorter term loan is a better deal, with significantly less money paid in interest.

Balloon payment

Another common way to structure a mortgage loan that will affect the home loan rate is whether or not there is a balloon payment attached to the payment of the loan. Often a mortgage will be structured to run for two or three years with a very low interest rate at the end of which there is a balloon payment that is the balance of the loan. At the end of the initial period, often the rate will increase, or the monthly payment will jump. Sometimes the entire loan is refinanced at that point.

Learning about the variables that impact loan rate figures is simple when you access the great resource web site found at Home Loan Rate or Home Loan. Check out the tips, links and cautions available here.

One should analyze these factors carefully before making a choice of a loan.

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