HOME LOAN

                                                              Mortgage Companies

There are a few mortgage companies that are well known across the country for dealing honestly with their customers, as well as providing resources that offer the borrower individualized help. Some of these companies include:

JP Morgan Chase & Co.: Though this company is large, individual branches such as the Chase Manhattan branch offer custom mortgage plans as well providing valuable information about buying real estate. With clients numbering over 30 million in the United States alone, the Morgan and Chase Co. has climbed to the pinnacle of success by helping their clients to formulate mortgage plans specifically tailored to their needs. To learn more, visit: www.Chase.com.

Countrywide Home Loans, Inc: As the country's leader in the home loan industry, Countrywide offers a variety of loans, up to 2 million dollars for qualified customers. The company is also the greatest independent residential mortgage lender, and so will be of great assistance if you are a first time buyer, helping you navigate the pitfalls of the real estate market. To browse through some average rates and payment plans, please visit the Countrywide Home Loans, Inc. website at: www.countrywide.com

National City Mortgage: The quality service of this once-small mortgage company has ensured its growth since its founding in 1955. By the year 2002, it was ranked the 7th largest mortgage originator in the nation. Representing clients with mortgages totaling in the area of 1,122, 46, National City Mortgage has over 300 offices throughout the United States. For more information on plans that might be right for you, visit www.NationalCityMortgage.com.

GMAC Mortgage: This is one of the subsidiaries of General Motors Acceptance Corporation, or GMAC, one of the largest companies for financial services in the world. They offer a wide variety of home loan options for every type of borrower, from the experienced to the first time home buyer. To discover what GMAC Mortgage has to offer, please visit: www.gmacmortgage.com

Ameriquest Mortgage: Ameriquest began as Long Beach Savings and Loan in 1980, and has served their clients with all of their mortgage and refinancing needs for more than 20 years. In this relatively short amount of time, Ameriquest has leant home owners billions of dollars in mortgage home loans and is a non-supervised mortgagor of the U.S. Department of Housing and Urban Development. With over 250 offices throughout the country, they have highly competitive rates and their loans are easier to qualify for than most. For more information, please visit www.ameriquestmortgage.com.

Helpful Information

Buying a home, securing a first home loan, or refinancing your current loan can be daunting, especially because you have to be on your guard at all times or someone will take advantage of you. There are a lot of predators out there who solely look to prey on the unsuspecting and the inexperienced, so arm yourself appropriately. For example, when dealing with brokers, you would be wise to choose an Upfront Broker (UMB) because all of their fees are disclosed at the very beginning in a commitment that establishes services and charges up front.

If your broker is not a UMB, then he or she can be converted to one for the duration of your transaction. Draw up a letter specifying the parameters of your partnership and then have the UMB sign and date it. Most UMB's will be fine dealing with you in such a manner, and if they are not, that tells you more than enough in and of itself.

Your letter should include:

For more helpful information, see Avoidable Mistakes and Helpful Hints.

                                                          Direct Lenders vs. Brokers

Direct lenders are financial institutions that will control the entire loan process, from the initial appointment to the application process, to closing. They will directly provide you with the borrowed funds. Brokers, on the other hand, are independent parties who will shop to mortgage companies and other lenders for you. There are distinct advantages and disadvantages of both.

Advantages of dealing with a broker:

Disadvantages:

Direct lenders might quote higher interest rates to you, but you don't have to pay the broker' s fee. The savings then for the borrower is the difference of wholesale prices to retail prices plus the savings from better market shopping by the broker. If your broker fee is less than your savings, then you would save money by dealing with a broker. A smart decision would be to go to an Upfront Mortgage Broker (UMB), instead of the traditional mortgage broker.

Loan Application - Whichever lender you have decided to go with, the application form will likely be very similar: a detailed report of your personal finances, your debts, your assets, and your credit. All of this information is to help the lender determine what the amount of risk involved in giving you the loan.

The two most crucial factors in this decision are: 

1. your willingness to pay, and 

2. your ability to pay. Your ability to pay back the loan is calculated by factoring length of employment, salary amount, and any outstanding debts. The loan officer determines your willingness to pay by asking you very specific questions, such as what you are planning to do with the property (if buying a new home), and by looking at your bill payment history. Basically, the longer your current employment, the better it will look to the lender, along with steady, punctual utility and credit card payments.

Most lenders use what is called the Uniform Residential Loan Application Form, which is divided into six sections: personal information, income, assets, credit information, property information, and debts.

Personal information may include a social security number, marital status, number of dependents, extent of education, current and previous addresses, occupation, and detailed employment information. Your income verification will include all sources of monthly income, including: bonuses, overtime, commission, retirement, interest, dividends, and any other outside sources. Assets include any paid automobiles, rental properties, homes, bank accounts, stocks, bonds, life insurance policies, etc.

Credit is perhaps the single most complicated and potentially damaging aspect of an assessment. One of the big mistakes that people make is not checking your credit before you apply for the loan. That way, if there are any mistakes or any outstanding debts you were not aware of, you can take care of them beforehand. Be realistic about your credit history. If you have a poor track record for paying bills on time and no balancing factors such as timely car or mortgage payments, then you might want to consider what is commonly called a “bad credit mortgage ” . Other high-risk borrowers, according to the lenders, are those who are self-employed (who cannot provide documented, auditable accounts) or who have moved repeatedly within the last five years.

Your verifiable property information should include (if applicable), the type of property, a copy of the purchase contract, the address of the property, and perhaps a copy of the down payment made to the seller. Debts include expenses such as child support or alimony, or outstanding loans or bills, including any liens, mortgages, car loans, credit card bills, school loans, etc.

For more information on understanding credit, visit our credit page.

The Mortgage Loan Process - The process for applying for a mortgage loan can be broken down into distinct steps.

For more information on the application form it self, please visit our loan application page.

Useful Tips To Help You Shop for a Home Loan To Save Money - Most consumers want to know which housing loan is the best in town. Unfortunately, that is the wrong question to ask.

There are more than 100 housing loan packages in the market and what is best for one person might not necessarily be the best for you. Each package has different features that are suitable for different needs.

Thus, a more appropriate question to ask is what are the factors that you should consider in choosing a housing loan? Here are some things you should note before signing on the dotted line for a home loan.

Pre-approval: Before you close a deal to buy a property, it is advisable for you to first get pre-approved for a bank loan.

With the setting up of the Credit Bureau in 2002, banks can now check your repayment history of loans and credit cards taken up with other banks. Were you late in paying instalments? Have you ever been sued? If the answer is yes, banks may not approve your loan application or they might approve a lower loan quantum. This could jeopardise your purchase of a property, and you might even have to forfeit the option money you paid.

Loan duration: A minimum loan duration is five years and the maximum 30 or 35 years, or till you are 65 or 70 years old, whichever is lower.

One way to decide on loan duration is to time the loan duration to match your intended retirement age. So, if you plan to retire by age 60, you should ensure the loan is fully paid up before you reach 60, rather than stretch it till you're 65.

Floating or fixed: If you think interest rates have peaked and are likely to go down, you might want a floating rather than a fixed rate package.

However, if you're worried about the possibility of banks revising interest rates upwards, you might want a package which fixes the interest rate for the next one to three years instead. It might not make sense to fix rates for more than three years since the lock-in period for most packages ends after three years. You can always shop around for a better package after that.

Flexibility of repayments: If you intend to make a lump sum repayment within the next one to three years, you should look for a package that offers you the flexibility to make such repayments without penalty. Some packages impose a penalty fee of up to 1.5 per cent of any lump sum repayment you make.

Transparency of rates: If you want to know the exact basis for the interest rates charged on the housing loan, you can consider loans pegged to interest rates that are publicly available, such as the three-month Singapore Inter-bank Offer rate (Sibor) or Swap Offer Rate (SOR) which move according to market conditions.

Basically, a home buyer pays an agreed percentage above the variable SOR for a specified period. You might want to consider such a package if transparency is a key issue for you and you are of the view that Sibor or SOR rates are falling rather than rising.

Penalties: Ask if any penalty will be imposed if you make a full redemption of your loan and how long the penalty period is. Currently, there are some housing loan packages with zero penalty period, while most loans typically have a penalty period of one to three years.

Interest-only: If you are a high income earner and in high tax bracket, choosing an interest-only mortgage might make sense. You benefit through savings in income tax as the interest portion of loan instalments for investment properties is tax-deductible.

This package also works well for short-term investors. By paying back only the interest, investors would benefit from lower cash outflow until they sell the property. As a result, they may be able to invest in two properties instead of one.

Interest-offset: If you have substantial cash you might want to consider an interest-offset mortgage instead. This basically links your current account to your home loan. The interest earned in your current account is the same rate as that charged on your home loan. By offsetting the interest earned on your current account against your home loan interest, you can enjoy big savings - in time and money.

Every dollar you put into this current account would have same effect as making a partial repayment of your loan, but give you the added flexibility of drawing down the cash in the current account if you need to. Whereas if you do a lump sum prepayment, the cash is 'locked' in the property and you lose liquidity. Thus, an interest offset package enables you to pay a lower effective rate of interest on your housing loan so that a bigger portion of your monthly instalment goes toward reducing the principal. This allows you to pay off your loan sooner and pay less in interest.

Promotions: Sometimes, banks might offer special promotional packages. If you engage the services of a mortgage broker, he would be able to provide you updated information on such promotions which could translate to additional interest savings for you.

Why better to apply loan through a Competent Mortgage Broker? In the past, when consumers shopped for home loans, they had to contact each bank individually to gather information. This a tedious process that takes up a lot of time. In the last few years, with the emergence of independent mortgage brokers in Singapore, home loan shopping and comparison have been made easier.

Basically, an independent mortgage broker who knows your requirements can help you zoom in on the most attractive home loan packages. You typically do not have to pay for the service of a mortgage broker as banks pay them a fee as they also help banks save on staff costs and resources.

In more advanced countries such as the US and Australia, people usually apply for home loans through a mortgage broker rather than go to the bank directly. In Singapore, many people are still unaware of the services and benefits of engaging a mortgage broker, but things are likely to change with public education and increasing awareness.

By Dennis K W Ng