Alabama | Home Loan | Mortgage | Refinance

Archive for May, 2009

Many thing have changed in the Automobile and Banking industries lately But that doesn’t mean that a car loan is no longer available to you.

Institutions have become a lot more careful who they loan money to, but that’s not necessarily a bad thing. Look around, interest rates have come way down in some cases I’ve seen 0% APR.

These are loans made directly from the auto-makers or entities of the automakers which are used to entice buyers to make their purchase. Still their a lot more careful about who they give a loan to.

For a long time loans were going to those barely able to afford them and like the Banking Industry they got caught short when those loans started to default.

Does this mean that you wont be able to get a loan if your credit history is less than stellar, of coarse not, it just means that lenders are a lot more cautious and you should be too.

Before you even consider buying a new car you need to be Honest enough to ask yourself some tough questions like:

*what are your finances currently like.

*what about your Job, are you expecting a raise or promotions anytime soon or is there a chance of layoff.

*what kind of car do you need or want, looking for some simple transportation, or are you looking more for luxury or maybe even something sporty.

Keep in mind that these factors will effect not only the price of the car, but also the price of the loan in the form of interest. Remember even though the car dealers are somewhat desperate to sell cars they are well aware of the difference between the car your need for transportation, and the car you really want.

If your buying what you need (basic transportation) they no your desire is not as great, so you can probably work out a much better deal on both Car and loan. But if it’s a car you really want or desire (like luxury or Sporty) their usually more popular so they won’t be so willing to give away the house to get you to buy.

But now were getting off track, how to deal with dealers is another article altogether.

Back to car loans. There are several thing you should take into account and look for when applying for a loan.

First your credit history will always have a bearing on the loan your offered. Poor or average credit doesn’t mean you’ll be denied credit, but it will probably mean higher interest rates.

Shop around, compare rates, the difference between one lender and another can be significant and there is no sense paying anymore than you have to.

You need to check the loan offer very carefully and watch out for prepayment penalties. Meaning the lender will charge a fee if you pay the loan off early, you’ll find you may want to refinance for a lower interest rate later or come into some extra money and want to pay off the loan and find your suddenly hit with a substantial penalty.

No matter what you should not take a loane with a prepayment penalty, also make sure the loan is a simple interest loan, nothing fancy no amortized or balloon loans, and even stay away from variable rate loans, The current problems won’t last forever and when their over interest rate will rise.

Remember to have the lender go over the following before you sign anything. You need to know the interest rate on the loan along with the type of loan. you shold also know the number of months of the loan and how much of a down payment is required.

You may get the best deal from the dealer through the manufacturer, but don’t count on that be sure to shop around for the best deal. If a lender (especially these days) can’t give you a deal that you can afford or accept, leave and go somewhere else if your prepared to do that you’ll eventually get a deal you can live with.

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It would be terrible to go through the process of applying for a loan and get to the closing table only to find out your interest rate is higher than you were quoted. This means a higher monthly payment and no doubt thousands of dollars wasted. How did this happen? Something happened on your credit report!!

As a first time home buyer, you may or may not be aware of what your credit score is. Your credit plays a very large part on what type of a mortgage and how much your interest rate will be. Your credit score is figured from what is on your credit report.

For example, a lady client of mine had a 735 middle score when she applied for her home loan. When she went to close, her interest rate had jumped 1.5%. Here she was, at the closing table, the seller was there, realtors, title people and she felt pressure to close. It was a purchase and once she signed, it was hers even though the interest rate was higher.

The sad thing was it was a very large national lender. However, she felt the loan officer was not honest and told her that since her score dropped 20 points she would not qualify for the loan she had applied for. She ended up in a different product at a higher rate. Now I have no way to tell if she was telling me the truth, but one thing I know for sure, she was mad and wanted me to refinance her out of that loan.

You Need to Understand What Your Credit Score Is and What Affects it!

That is why its a good idea to take a look at your credit report and understand what your credit score is. Sometimes we might get excited about closing on our home and then decide we need furniture. Such a major purchase of furniture just before closing could affect your credit score. Lenders pull your credit report again just before closing. If your score has lowered it can change your interest rate and what program you will be closed with.

I always encourage people to not do anything major until after the closing. I know your excited, but wait until after to make any major purchase!!! I’ve seen it where couples decided to buy a car after they were approved for a loan and then guess what happened? You’re right, it changed what they expected for closing.

It all starts with your credit report. Make it a habit to know what is happening to your credit profile and how it affects your score. It is a very good idea to see your credit report periodically, especially if you’re planning a major purchase. You may even want to subscribe to a service that monitors your report for you. That way you’re notified when something affects your score and can act on it immediately.

Why waste time and money? Mr. Ragan has 24 years helping people reach their goals. Construction, buying foreclosures, real estate investing, first time home buyers finding a mortgage and doing your own credit repair. Avoid costly mistakes and visit his website with hundreds of pages and free reports.

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The cash flow from the CMO collateral may be allocated in a variety of ways. Usually, it is first allocated to meet the interest obligations on all tranches in the offering. Principal repayments, both scheduled and prepaid, are then distributed to the different classes of bondholders according to a predetermined priority schedule which is outlined in the prospectus or offering circular. The trance receiving principal repayment is referred to as active or currently paying. In more complex structures, more than one tranche can be paying principal at a time.

Each CMO tranche has an estimated first payment date, on which investors can expect to begin receiving principal payments, and an estimated last principal payment (or maturity) date, on which they can expect their final dollar of principal to be returned. The period before principal payments begin in the tranche, when investors receive interest-only payments, is known as the lockout period. The period during which principal repayments are expected to occur is called the window. Both first and last principal payment dates are estimates based on prepayment assumptions and can vary according to actual prepayments made on the underlying mortgage loans.

THE VARIOUS TYPE OF CMOS

The most basic CMO structure has tranches that pay in a strict sequence. Each tranche receives regular interest payments, but the principal payments received are made to the first tranche alone, until it is completely retired. Once the first tranche is retired, principal payments are applied to the second tranche until it is fully retired, and the process continues until the last tranche is retired. The first tranche of the offering may have an average life of 23 years, the second tranche 5-7 years the third tranche 10-12 years and so forth. This type of CMO is known as a sequential pay, clean or plain vanilla offering. The CMO structure allows the issuer to meet different maturity requirements and to distribute the impact of prepayment variability among tranches in a deliberate and sometimes uneven manner. This flexibility has led increasingly varied and complex CMO structures. CMOs may have 50 or more tranches, each with unique characteristics than may be interdependent with other tranches in the offering. The types of CMO tranches include:

Planned Amortization Class (PAC) Tranches

PAC tranches use a mechanism similar to a sinking fund to establish a fixed principal payment schedule that directs cash flow irregularities caused by faster or slower-than-expected prepayments away from the PAC tranche and toward another companion or support tranche. With a PAC tranche, the yield, average life and lockout are more likely to remain stable over the life of the security.

PAC payment schedules are protected by priorities which assure that PAC payments are met first out of principal payments from the underlying mortgage loans. Principal payments in excess of the scheduled payments are derived to no-PAC tranches in the CMO structure called companion or support tranches because they support the PAC schedules. In other words, at least two bond tranches are active at the same time, a PAC and a companion tranche. When prepayments are minimal, the PAC payments are met first and the companion may have to wait. When prepayments are heavy, the PAC pays only the scheduled amount, and the companion class absorbs the excess. Type I PAC tranches maintain their schedules over the widest range of actual prepayment speeds – say, from 100 PSA. Type II and Type III PAC tranches can also be created with lower priority for principal payments from the underlying loans than the primary or Type I tranches. They function as support tranches to higher-priority PAC tranches and maintain their schedules under increasingly narrower ranges of prepayments.

PAC tranches are now the most common type of CMO tranche, constituting over 50% of the new-issue market. Because they offer a high degree of investor cash-flow certainty, PAC tranches are usually offered at lower yields.

Targeted Amortization Class (TAC)

TAC tranches also provide more cash-flow certainty and a fixed principal payment schedule, based on a mechanism similar to a sinking fund, but this certainty applies at only one prepayment rate rather than a range. If prepayments are higher or lower than the defined rate, TAC bondholders may receive more or less principal than the scheduled payment. TAC tranches’ actual performance depends on their priority in the CMO structure and whether or not PAC tranches are also present. If PACs are also present, the TAC tranche will have less cash-flow certainty. If no PACs are present, the TAC provides the investor with some protection against accelerated prepayment speeds and early return of principal. The yields on TAC bonds are typically higher than yields on PAC tranches but lower than yields on companion tranches.

Companion Tranches (CT)

Every CMO that has a PAC or TAC tranches in it will also have companion tranches (also referred to as support bonds), which absorb the prepayment variability that is removed from the PAC and TAC tranches. Once the principal is paid to the active PAC and TAC tranches according to the schedule, the remaining excess or shortfall is reflected in payments to the active companion tranche. The average life of a companion tranche may vary widely, increasing when interest rates rise and decreasing when interest rates fall. To compensate for this variability, companion tranches offer the potential for higher expected yields when prepayments remain close to the rate assumed at purchase.

Similar to Type II and Type III PACs, TAC tranches can serve as companion tranches for PAC tranches. These lower-priority PAC and TAC tranches will in turn companion tranches further down in the principal payment priority. Companion tranche are often offered for sale to retail investors who want higher income and are willing to take more risk of having their principal returned sooner or later than expected.

Z-Tranches (also known as Accretion Bonds or Accrual Bonds)

Z-tranches are structured so that they pay no interest until the lockout period ends and they begin to pay principal. Instead, a Z-tranche is credited Accrued interest and the face amount of the bond is increased at the stated coupon rate on each payment date. During the accrual period the principal amount outstanding increases at a compounded rate and the investor does not face the risk of reinvesting at lower rates if market yields decline.

Typical Z-tranches are structured as the last tranche in a series of sequential or PAC and companion tranches and have average lives of 18-22 years. However, Z-tranches can be structured with intermediate-term average lives as well. After the earlier bonds in the series have been retired, the Z-tranche holders start receiving cash payments that include both principal and interest.

While the presence of a Z-tranche can stabilize the cash-flow in other tranches, the market value of Z-tranches can fluctuate widely, and their average lives depend on other aspects of the offering. Because the interest on these securities is taxable when it is credited, even though the investor receives no interest payment, Z-tranches are often suggested as investments for tax-deferred retirement accounts.

Floating-Rate Tranches

First offered in 1986, ‘floating-rate CMO” tranches carry interest rates that are tied in a fixed relationship to an interest rate index, such as the London Interbank Offered Rate (LIBOR), the Constant Maturity Treasury (CMT) or the Cost of Funds Index (COFI), subject to an “upper limit, or cap,” and sometimes to a lower limit, referred to as a “floor”. The performance of these investments also depends on the way interest rate movements affect prepayment rates and average lives.

For the above reasons described, CMOs are considered by a select few platforms to be an asset that is easy to validate and prove ownership. In addition, the trading platform is able to be added as the CMOs Beneficiary allowing for the appropriate financing to be obtained. The result is a CMO asset that can be purchased for pennies on the dollar with nominal returns and subsequently placed and traded successfully in a Private Trading Program with yields the owner once only dreamed of.

InvestorEarth.com is an educational site dedicated to providing investors proven, high yield Private Trading Investments in a global recession market. Please visit http://www.investorearth.com.

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Last month there were more foreclosures then ever before, which means they are speeding up not slowing down, as some might say. There’s no doubt homeowners want to avoid foreclosure as do the Banks. Banks do not want foreclosures written on there books, because it runs the risk of the Bank failing. Homeowners usually do not want to lose their homes. This means if the two work together early enough, a solution should present itself.

Most of the foreclosures are due to illegal lending practices at the start of the lending process. Not too long ago, people who were considering getting a new home had to produce a 30 percent down payment, as well as one year of work proof of income; this established that they did have means to buy the home, were good at money management and would likely keep up with loan payments.

Things have changed since then, because New lending laws deemed those practices discriminatory. At the same time loan originators were getting paid large fees, based on the value of the loan. This caused many brokers and agents to break the rules and require less documentation. So with those two aspects combined, it was much easier to get a loan. Buyers and people refinancing didn’t have to prove as much and large loans were given out to people that could not afford them. These loans were commonly referred to as “liar loans.” Most of the bank meltdowns today have come from Banks leveraging mortgage driven securities that lost money because of these bad loans.

Millions of new Homeowners were not completely informed on what they were signing when getting their loans. They ended up agreeing to adjustable rate mortgages, usually with interest only introductory periods. When the rates increased or the interest only period expired, their housing bill usually would triple and most Homeowners could not keep up with the payments.

If you’re facing foreclosure and find yourself in this situation, a loan modification may be your answer. A loan modification is a mortgage plan, were you can get different terms of your loan modified. Think of it as a refinance option, were you can start affording the payments on your home again.

Most mortgage loans are designed around two items, the interest rate and the time period over which the loan has to be paid off. The interest rate is the percentage of the remaining balance that the lender takes as a profit on each payment, if your interest rate is to high, you will find that you end up paying a lot more than your house is appraised for. Most interest rates are compound interest as well and over the lifetime of most mortgages, that can add up to a very large amount.

Loan modifications will either assist in reducing your interest rate or extend the terms of the loan, and sometimes, it will do both. To get a loan modification package you will have to prove to the lender that you have encountered financial hardship and difficulties, that have reduced your monthly income significantly, which has kept you, or will keep you from making your monthly payments.

You will want to get help from a mortgage modification expert to do the negotiating with your Bank. Especially these days, when the servicers are so busy with people calling in for help, they usually just inform victims that they are “working” on the file, or it’s in “processing” and they are waiting for an answer. If you are in losing your home, and the lender doesn’t provide assistance in a timely fashion, you need to find help from somewhere else.

Hiring a loan modification expert can help the process speed up because these people work with the banks all the time, the bank employees know them and will speak to them and get a modification arranged for you. You don’t want to be stuck sitting around waiting for your bank to “approve” a loan mod, while they are secretly intending on taking the home right out from under you. Having a professional mitigator in your corner is the way to go, if you want to get a loan modification before your home sells at auction.

Nick publishes articles for the ForeclosureFish website. These articles provide resources to borrowers facing the loss of a home, describing various methods they can use to stop foreclosure. The site examines numerous options, including mortgage modification, foreclosure refinancing, deed in lieu of foreclosure, filing bankruptcy, and others. Visit the site to read more about how foreclosure works: http://www.foreclosurefish.com/

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Bad credit auto loan refinance are provided by a number of lending institutions whether online or offline. Some companies specialize in providing bad credit auto loan refinance. These companies specifically target those who have poor credit ratings. Bad credit auto loan refinance is a good option if you are currently charged a higher rate of interest and your lender will not provide you with a better interest rate. Bad credit auto loan refinance is very important for people who are paying a higher rate of interest so that they can avail of a lower rate of interest. Bad credit auto loan refinance will allow you to pay your remaining current balance in full and shouldered by a bad credit refinance company. In turn, you will make the necessary payments to the refinancing company.

Bad credit auto loan refinance is especially applicable on loans made from the dealers. Most dealers charged a higher interest rate than other lending institutions. Bad credit auto loan refinance will not only allow you to get a lower interest rate, it will also extend the length of time you need to pay the loan. Due to the longer period the monthly payment will also be lower.

In order to re-establish your credit with bad credit auto loans you need to pay your monthly payments on your bad credit auto loan refinance on time. If you are paying off a loan and you have a record of bad credit then you need to report your loan to all three major credit bureaus so as to re-establish a good credit standing again. Some people apply for a prepaid credit card but this would not help since a credit card does not constitute a loan. The only way to improve your credit rating is to show that you can honor a loan contract with a few years of on time monthly payments on your borrowings. This may not erase your past bad credit history but it will certainly improve your credit score.

Availing of bad credit auto loan refinance is a good way to pay lower interest rates for your auto loans. You can make your application for bad credit auto loan refinance online. Choose from among the numerous bad credit auto loan refinance companies that offer the best interest rate. Once you made the application wait for the bad credit auto loan refinance company to make a decision and approve your application.

Getting assistance from a loan modification company is a sound idea in the case of most homeowners. Working with your lender through one of these companies takes a huge load of responsibility and stress off your shoulders and even increases your chances of a successful negotiation.

Loan modification companies are run by loan modification attorneys and specialists. Besides being trained specifically in modifications, many also have connections with employees in lending offices. This means your chances for approval at least double.

The downside to searching out a loan modification company is that there are hundreds of scam companies across the country, and they’re difficult to spot if you don’t know the warning signs. Often the scam companies seem completely legitimate until it comes time that you should have a completed modification and instead you have an empty wallet.

Scam loan modification companies will almost always charge you an upfront fee for initial consultation, and then continue to tack on fees over a period of time. Usually any other money they ask for besides the upfront “fee” is similarly claimed to help your modification with your lender. Be careful not to believe these lies and if you are dealing with a firm that seems legitimate except they repeatedly ask for money, consider getting in touch with the authorities. The FBI is actively seeking out these companies and is looking to prosecute anyone involved.

Check with the Better Business Bureau before doing business with any loan modification company.

Legitimate companies usually don not charge for the initial consultation, but they do charge for other services. Real companies give you a consultation and tell you the best way to go about your modification, or even if there is no chance you’ll be accepted.

If you are qualified or close to qualified, they will work with you to first fill out your application. Then they will either write the hardship letter for you or assist you in writing a convincing and professional-looking letter. After submitting both of those they serve as a mediator between you and your lender to come to an agreement that both sides can agree on.

Negotiations can take quite a long time, and even after that being approved can take up to eight weeks. However, having a loan modification company handle the paperwork can at least take some of the worry off of your mind. Just be careful which company you entrust your modification with.

For more information about a loan modification company that is right for you, visit the #1 loans modification resource on the net: http://HomeLoanModifications101.com

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The Cash-on-Cash Return is a measure of an income producing property’s interest rate return on invested equity. The ratio is derived by taking the annual net cash flow (i.e., the cash flow available to the investors) divided by the equity invested.

Cash-on-Cash Return = Net Cash Flow / Invested Equity

There are four types of cash-on-cash return: Leveraged, Unleveraged, Before Tax and After Tax. Consider the following examples:

Example 1: Suppose an investor purchases a property for $10,000,000 with an equity investment of 25% – $2,500,000. At the end of the first year, the available cash to be distributed to the investor is $200,000. The leveraged, before tax cash-on-cash return would be:

$200,000 / $2,500,000 = 0.08% x 100 = 8.00%

Example 2: Let’s assume the investor has a federal and state tax rate of 25%. Then, the leveraged, after tax cash-on-cash return would be:

$200,000 x 25% = $50,000

$200,000 – $50,000 = $150,000

$150,000 / $2,500,000 = 0.06% x 100 = 6.00%

Example 3: Alternatively, the investor purchased a property with all-cash for $10,000,000. Since there are no loan obligations, the investor is entitled to all of the net cash flow available. Assuming the property has a net cash flow of $740,000 then the unleveraged, before tax cash-on-cash return would be:

$740,000 / $10,000,000 = 0.074% x 100 = 7.40%

Example 4: Again, let’s assume the investor has a federal and state tax rate of 25%. Then, the unleveraged, after tax cash-on-cash return would be:

$740,000 x 25% = $185,000

$740,000 – $185,000 = $555,000

$555,000 / $10,000,000 = 0.0555% x 100 = 5.55%

Similar to a cap rate, the cash-on-cash return is a simple metric an investor can use to evaluate the potential return of a property (i.e. “risk”) versus an alternate investment such as a US Treasury Bond. It is a reliable tool for stabilized properties but does have several short comings an investor should consider.

Shortcoming #1: Cash-on-cash is most reliable in the first year than in the future years. This is due to the immediacy of the income. Most property buyers try hard to accurately reflect a property’s first year of operations in their pro forma. However, the projections for the following years are all subject to the buyer’s assumptions. Those assumptions can prove wildly incorrect.

Shortcoming #2: Cash-on-cash can be manipulated by the property’s performance both good and bad. A property that is forecast to operate at 93% occupancy but is operating at 95% occupancy may produce a higher cash-on-cash return for the investor. Alternatively, the same property could be at 92% occupancy and the owner may choose to defer certain maintenance items to maintain his cash on cash. In this scenario, the cash-on-cash return may be what was projected but it comes at a future cost as deferred maintenance will need to be performed sometime.

Shortcoming #3: Returns are increased by interest only mortgages. Since a principal payment does not need to be made there is more cash flow available to the investor. This will provide higher cash payments but will reduce the sale proceeds at the end as a greater amount of principal will need to be prepaid

Shortcoming #4: It does not take into account property appreciation. Some investors may opt for lower cash-on-cash returns to invest in a property that has a greater chance of appreciation than purchasing a property with stabilized cash-on-cash returns but little to no appreciation.

Shortcoming #5: The less equity into the property, the higher the cash-on-cash returns. It stands to reason that the less equity used to purchase an asset the greater the returns to the investor. Some may argue this is not a shortcoming. However, consider that by putting less equity into a property up front it increases the risk to the investor when it comes time to refinance or sell especially if the property has had little appreciation or has experience depreciation. If you are tempted to do this make sure that the reward is well worth the risk.

It should be noted that most cash-on-cash returns are quoted before tax. The main reason is that each investor’s tax situation is unique. An investor should use cash-on-cash return as just one of several metrics in evaluating a specific property for purchase.

Apartment Analytics Software, LLC is one of the real estate industry’s leading apartment investment software firms dedicated to providing investors with powerful and easy-to-use analytical tools enabling them to crunch the numbers with ease and make smart investment decisions with total confidence.

www.ApartmentAnalyticsSoftware.com Ph: (800) 853-7255 Email: info@ApartmentAnalyticsSoftware.com

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