A home equity lines of credit (HELOC) is a type of loan that allows the borrower use his house as collateral for a loan that that the lender will issue. The loan will be effective for a specified period of time. Since houses are very valuable assets to people, they often do not avail themselves to a HELOC unless it is absolutely necessary. Examples of instances wherein a HELOC is called upon are for medical emergencies, for education, home improvement or to pay of debts, like eos cca. Abusing a HELOC is the main cause for the sub prime mortgage crises.
There are differences between home equity loans and HELOCs. In the latter, a debtor isn’t issued the whole amount up front. Rather, the borrower can use a credit line & borrow (in increments) from the total borrowed amount, which can amount up to (but not beyond) the sum of the loan. The withdrawal period, which typically lasts between five to twenty five years, is when HELOC funds can be borrowed. In order to repay the loan, the withdrawn amount (along with the interest) must be paid.
A HELOC may also consist of a monthly payment that is the absolute minimum, in which case you only have to pay the interest. You should also know that the borrower may make payments, of any amount, as long as it is greater than the minimum payment. It should, however, be less than the outstanding balance. At the end of the draw period, you are required to pay the principal amount. The repayment at the end of the draw period may either be through a loan amortization schedule or a lump sum, which is called a balloon payment.
Another difference between a HELOC and a conventional home equity loan is that the HELOC has a variable interest rate. That is, the interest rate of a HELOC is based on a prime rate, which is an index. Thus, the interest rate can vary over a period of time. You should also note, that not all lenders for HELOCs have margins that are calculated the same. The margin is the difference between the interest rate and the prime rate that you will pay. So one must see to it that they don’t get overwhelmed by a volatile interest rate, as it can (quickly) make a HELOC too difficult to pay off, causing one to go into arrears and be left at the mercy of diversified debt collection, or some other debt collector.
In the early 2000s, Americans used HELOC loans to great degree. This is due, in part, to the fact that federal and state laws made the interest rate deductible. Thus, the cost of borrowing funds (from a collateralized home) became lower. It also offered a good tax incentive that has advantages over other methods, such as credit cards. HELOC loans are also flexible, which gives another advantage. The flexibility is both in the repaying schedule and in borrowing.
Furthermore, second mortgages have a less than favorable image compared to HELOC loans, with the former implying an undesirable amount of debt. However, within the lending & borrowing of industry itself, HELOCs are recognized as secondary mortgages. Since the underlying collateral of a HELOC loan is the home, the failure of the borrower to repay the lender, may result in the home’s foreclosure. Thus, most lenders require that the borrower is able to maintain a certain level of equity in the home before they agree to a HELOC.
Many mortgages in the United States are different from loans in countries such as Canada. In the latter, loans are generally recourse loans. In contrast to this, non-recourse loans are typically used in the United States. This type of loan does not hold the borrower personally liable for the pledge of collateral. Thus, a HELOC loan may incur liabilities for the home owner, if it is a recourse loan. This distinction is important during times of foreclosure. A borrower has personal liability for the foreclosed property’s recourse debt; if this debt is not resolved, it is then sent to debt collectors, like transworld collection.
As you can see, HELOC loans have their advantages and disadvantages. There are many reasons why you might choose a HELOC loan, and there are also reasons why you may not. HELOC loans are good for education, for instance, because it is a way to fund the future. You should avoid using HELOC loans for day-to-day expenses. That being said, the importance of knowing what HELOC loans are, lies in the fact that you have options if you need cash and you have no other sources for it.
Should your find a HELOC lender, question whether they are willing to negotiate certain terms on the line of credit, some of which will ensure that you will not become financially overwhelmed.
Low doc (low documentation) loans are perfect for people who cannot verify their income during application for a home loan. Because lenders are very strict in approving loans, a lot of people are finding it extremely difficult to obtain a home loan. The lack of proper documentation keeps these people from fulfilling their dreams of home ownership – this is why low doc loans are available. These are designed to help people get loans, despite not having enough proof of income. Low doc loans also makes qualification easier for those who also have debt items, like allied collections, on their credit report.
There are many types of low doc loans available for everyone. A few examples are CBA low doc, ANZ low doc, and Westpac low doc. It’s a good thing that there are different lenders that are now offering this kind of loan, because this means more people are going to have the opportunity to buy their own homes.
Why is there a need for low documentation loans?
These loans are created to provide assistance to people who cannot prove their income to lenders. Before they can apply for a loan, they have to make sure that they have a stable source of income. This is a big requirement because lenders want to make sure that whomever they lend money to, will be able to meet monthly mortgage payments.
But not everyone has permanent employment. There are several types of individuals who don’t work exclusively for a company. They are freelancers, contractors, and self-employed individuals. These people make good money, enough to afford a house, but since they are not with a particular company, they would not have proper documents to show lenders proof of their financial status.
This is what makes things difficult for a lot of people. They can afford a house, but technicalities (like paperwork) will make it impossible for them to get the money they need to buy a house.
What can borrowers do to obtain a loan?
So what can these people do? It’s either they try to get into a company or find other means to get approved for loans, without having to present specific documents. The former will be hard to consider, because they could already be making good money with their jobs. The only option would be to look for another way to get approved without submitting all the required documents.
Low documentary loans will not require a lot of paperwork. Lenders that process them are going to use alternative means to check a borrower’s eligibility. An alternative proof of income should suffice. This makes things easier and faster for both parties.
How hard is it to get a low doc loan?
Is it hard to get a low doc loan? No, it’s not. Aside from the fact that it will not require you to submit a lot of things, it’s also designed to make loan application very quick and easy. And if you have a very good mortgage broker, you should be able to know everything you need to do. You’ll have no room for errors and you will be pointed in the direction of the right lenders. And if your credit report has any mistakes, like Cach debt collectors or any erroneous debt item, you can get it removed before applying for a low doc loan.
Why Should You Apply For a Low Doc Loan?
First off, if you are self-employed and don’t have a regular income, then a low documentation loan may be a good fit for you. Remember that if you provide more information to the lender (such as a letter from your accountant), the terms of the loan (and the interest rate) will be more favorable.
What Should I look Out For?
Because of the higher risks associated with these types of loans, a lender will generally charge higher interest rates. If you go with a type of low doc loan, called an asset lend – which sometimes requires no documentation at all – then be prepared to pay higher interest rates.
Another thing to think about is mortgage insurance, which is something that a lot of lenders will make you get as a requirement for the loan, which further adds to the cost. Higher deposits are also usually requirement, as well.
There are 3 main types of Low Doc or No Document Loans.
No Ratio Loans
These loans are for borrowers who don’t want to reveal their incomes; thus a lender does not have to consider the amount of debt you owe, in comparison to the amount of your income. Decent credit and a reasonable amount of assets (from the borrower) is a criteria that has to be met, in order to be seriously considered for the loan. If gathering income documentation is going to be a logistical nightmare, then this loan can provide a more efficient streamlined process. Assess your credit report to see if there are any errant debts that need to be resolve – CleanUpCreditFast.org/Free/Help can help you remove items that were wrongfully placed on your report.
No Doc Loans
To get credit, the No Doc loans requires the least amount of documentation. The lender evaluates your loan request with the minimal amount of financial information from the lender, and maximum privacy is assured.
Stated-Income (Low Doc) Loans
If your income fluctuates week to week, month to month, the Stated-Income, or Low Doc loans is the most attractive. However, unlike the No Doc Loans, the Low Doc Loan does require the lender to disclose earnings, usually for two years, and might need to show tax returns and bank statements.
If a No Doc or Low Doc loan is right for your situation, seek the counsel of a mortgage broker. It might be beneficial for you to pay a higher rate for this loan. A good mortgage broker can also show you how to obtain the necessary documentation.
Credit counseling can be very helpful for some consumers who find themselves in debt trouble. For many consumers, simply having a third party to talk to (about their financial issues), is a great help; but do keep in mind that there is a difference between credit counseling and credit repair programs – they are not one in the same.
Depending on where you live, finding credit counseling is fairly easy. If you live in a metropolitan area, your chances of finding a reliable and knowledgeable credit counselor are better than if you live in a rural area. A good place to start, is with local non-profit agencies; many of these offer free or very low-cost credit counseling services.
These types of credit counseling agencies will work with you to help you better understand where you are financially, and offer some guidance as to what can be done to improve your situation. In many cases, they offer free educational materials and workshops to help you establish a budget that meets your needs and circumstances. Go to removedebtfast.org/methods to get a better example of what a credit repair program is.
With this type of counseling, you can begin to take hold of your financial situation by learning effective ways to budget your money (and reduce spending) – you can also get a clear understanding of how to keep (present and future) debt, within your control.
In addition to this, credit counseling agencies may also be able to help you draft letters to your lenders. Many agencies have pre-drafted letters that they can share with you.
In addition to the aforementioned points, there are some important and distinct differences between credit counseling and debt repayment plans that are offered by commercial companies; this is especially true in regard to the long-term effects of your credit.
When you take advantage of credit counseling, there is no signed agreement or legal commitment, none of your accounts are affected by the counseling agency and you maintain overall control of how your debts are paid – and when they are paid. Credit counseling does not affect your credit rating and does not show up on your credit report.
However, because there is no legal or signed commitment, the credit counseling agency leaves the payment of your debts, up to you – which may leave you exactly where you started, if you are not taking some form of constructive action. Credit repair companies, on the other hand, may take a few liberties on their clients behalf, and if they know what their doing, can lead to favorable results (provided they have the full cooperation of the client); removedebtfast.org/help is a perfect example of this type of credit repair service.
Credit counseling could be a great option to consider if…
- You can’t pay the minimum balance on your credit cards.
- You’re always late on payments (one or more of your regular bills).
- Creditors and collection agencies are constantly harassing you.
- Your efforts to compromise with creditors, are repeatedly met with failure.
What Credit Counseling Services Can Do For You
A good credit counseling service will concentrate first on finding out where you are, financially. They will look at how much income you have coming in, and how much you have going out. This is where the initial problems can often be corrected. A qualified credit counselor will be able to negotiate your current debt balances with your creditors. You may even find that you are eligible for a debt consolidation loan – a method of debt settlement, that allows you to roll all your outstanding balances, into one personal loan.
By having the credit counseling services do this, they should be able to negotiate a lower interest rate for you, consequently saving you money and reducing your monthly repayments. Credit counseling companies can also provide you with invaluable advice about your spending patterns, and how to actively control your debt. A good credit counselor will also help you avoid the temptation of opening up new loans (to gain credit), and will offer ideas to raise your credit score.
Debt settlement programs, like professional credit counseling services, are critical tools for those struggling with huge amounts of debt. Paying off debts improves your credit score, and having good credit is essential when looking to buy or rent property, purchase a car, start a business and even establish utility services.
Your credit score affects many aspects of your life, so it’s best to leave consumer debt settlement up to a professional credit counseling service. The end result, is relief from debt and it will make the rest of your life much easier! Under certain circumstances, a case can be made for a credit repair company, if the client wishes to have a less hands-on approach, on their end – go to http://www.removedebtfast.org/methods/quick-fix for more information on credit repair.
Overall, the credit counselor should first analyze and understand your credit situation, draw up a workable solution for you (to get rid of your debts), then motivate you towards reaching your financial objectives. This is the primary responsibility of a good credit counselor. It’s one thing to negotiate interest rates, but to actually help you focus on the financial goals ahead (and keep you on track), is what separates an ordinary credit counselor, from a good one!
Criminal activities and ethical violations in different industries have already affected the economy in the past decades, especially in the financial, housing and banking sectors. This article is going to help people observe the complicated criminal and ethical issues that surrounds mortgage fraud. Fraud, in its simplest form, is deliberate deception and misrepresentation. While fraud in action is defined to be as, one who is deceptive by misrepresenting facts, information and figures.
Definition of Mortgage Fraud
Mortgage fraud is not only a predacious lending practice which target certain borrowers, but based in the Federal Bureau of Investigation, mortgage fraud is said to be a material misrepresentation, misstatement, or omission of that which is relates to a property or a potential mortgage, granted by a lender (or an underwriter) to fund, insure or purchase a loan. In this stated definition, mortgage fraud may be committed by both, the industry professionals, as well as, individual borrowers. If you feel that you have been a victim of mortgage fraud, in hindsight, go to this site to learn about the statute of limitations.
Reason in Committing Mortgage Fraud
There are a number of reasons professionals and borrowers are interested in committing mortgage fraud. The primary factors as to why people commit fraud, is for profit and for housing.
Fraud for housing may be committed by the borrowers who are usually assisted by loan officers or some lender personnel, to misrepresent or forget about related details concerning: income, employment, debts, credit, property value (as well as the property’s condition) – with the sole goal of maintaining or obtaining ownership in real estate.
It is very vital to note that housing fraud might be committed by an individual who intends to occupy an asset as their primary residence, or by an investor who intends to rent a property to re-sell for gain a source of income.
Fraud for profit might be committed by the professionals in the industry who misrepresent, misstate, or forget related details about personal or (clienteles’) income and employment, debts and credit info; or property’s value (and/or its condition) – with the goal to maximize profits in a loan transaction. It is also necessary to note, that fraud for profit might be committed by any professional in a loan transaction chain, which includes: the real estate agent, builder, mortgage broker or loan officer, credit counselor, property inspector, real estate appraiser, title company, insurance agent, escrow agent and attorney!
Professionals in such industries can also work in concert as a network, in order to defraud lenders, borrowers and underwriters – to share profits and maximize fees, in all of the mortgage related services. These actions are driven either by their aim to gain extra sales in commissions, or just to improve a position in investment. If you find yourself at the mercy of such a cabal, it may serve you better to seek legal council to address matters. Obviously, that status of your credit will be compromised, during such mishaps; so, you have the option to have a written explanation added to your credit report – giving a detailed explanation of your misrepresented debt; the structure of the letter should be similar to a goodwill letter. Go to http://deletebadcredit.org/shortcuts/the-easy-way for instruction on how this is written.
Usual Mortgage Fraud Scams and Schemes
The most usual financier mortgage fraud schemes are the various types of property flipping, straw buyer scam and the occupancy fraud. Property flipping is not at all illegal, if it is concomitant with buying a house, fixing or holding it and reselling it for the sake of a profit.
However, when a property is bought below the market value and directly sold at profit, with the assistance of a corrupt appraiser who confirms that the property value is really double the amount of the initial purchase – it is then when mortgage fraud has ben committed.
Occupancy fraud is a scheme that is used by investors in qualifying for a higher loan-to-value (ratio) mortgage, and purchases the property at a lower out-of-pocket cost, that further lowers the rate of the mortgage. Occupancy fraud happens when a borrower is claiming that a home will be owner-occupied, to obtain a bank status that is favorable, when the house will really remain vacant.
The straw buyer uses their income, identity and credit, to get the property for a new buyer who might not qualify. Straw buyers are used by some investors who are, unknowingly or willingly covering up other forms (and multiple layers) of fraud.
The most typical singular mortgage fraud scams are asset or income falsification and identity theft. Identity theft is where the real buyer of a property is falsely obtaining financing, using an identity that was stolen from another person – using information that includes social security numbers, addresses and birth dates; if you are a victim of these chain of events, and you find yourself being harassed by collection agencies, like ic systems, you can request a cease & desist order to stop the harassment.
The most typical professional mortgage fraud scams are the appraisal fraud and air loan. The air loan is an obtained loan in a nonexistent property or for a nonexistent borrower. A set of professionals will usually work together in creating a fake borrower; and while the air loan scam put cash in the hands of the culprits, no property will ever be sold or bought! Appraisal fraud usually involves a loan officer, an appraiser and a real estate agent, who work together in maximizing the amount of loans to increase their commission.
On the up-side, any individual can progress the market by reducing mortgage fraud. People must be realistic in their expectations in the borrowing and homeownership experience. Investors too, on the other hand, must set realistic goals for their profits.
Industry professionals should aspire to a higher standard of ethics, by providing incentives & rewarding responsibility.