Archive for July, 2008|Monthly archive page

What Is A Sub-Prime Mortgage Loan

With all of the talk in the news lately about the decline of the United States economy and the real estate market many have been hearing the term “sub-prime mortgage.   But what is a sub-prime mortgage? And considering all of the negatives associated with such a mortgage product are there any benefits for someone to seek out and obtain a sub-prime mortgage?

A sub-prime mortgage is a loan to a borrower with less than perfect credit. This can happen to the borrower for many different reasons that put them in the position of needing a mortgage loan they may not otherwise be able to get.

A sub-prime borrower has either missed payments or been late on them. This forces the lender to view them as a higher risk on a new loan. They recognize they may have higher costs associated with this type of borrower so they charge a higher rate to compensate for potential losses.

Sub-prime loans can be structured in various ways. The most common loan of this type is the ARM loan. An adjustable rate mortgage can appear to the borrower as though they are getting a favorable rate at first when in reality it only starts out that way.

The major problem with this is when the loan adjusts to a higher rate many of the borrowers cannot make the payments, which causes their home to go into foreclosure. This only leads to more bad credit and financial problems for them.

Today you hear about the high foreclosure rates in America and much of it goes back to sub-prime loans. It reality the lender is partly to blame and some of them have been hit so hard they are going into bankruptcy themselves. These are usually smaller lending institutions that are having a hard time weathering the storm, however even the largest of lenders are hurting from all these bad loans.

It does not have to be all bad however. There are many benefits to both the borrower and lender on sub-prime mortgages. First of all this gives the borrower a chance to improve their credit score by making the payments on time. This can lead to you being able to qualify for a better interest rate which can be done by refinancing the sub-prime loan.

It can be good for people who have run into some bad luck financially. Things like job loss or divorce can really hurt a person’s credit, so can an unforeseen tragedy such as an illness or disaster caused by a storm. A sub-prime loan can help these people get back on their feet as well.

From the lenders point of view they charge high rates and can make high profits when sub-prime loans work out. This allows them to be part of helping a person get a new home they may not have been able to get and making a profit as well.

Hopefully this will answer your question on what a sub-prime mortgage is and if it applies to you will give you confidence to go in and apply for one yourself.

Veronica Key is a sales representative for Forest Hill Real Estate and is a waterfront Toronto condos expert. Contact Veronica and her team of professionals for information on Toronto real estate prices and to search for available properties.

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Buying A Home – The Phantom Offer

After a long and exhaustive search you have finally found the house for you so you instruct your real estate agent you put in a offer for you. You are told that there are no other offers on the property so you think your chances of getting it are pretty good. But when it comes time to present your offer your are told that there is another offer and it just happens to be “better” than yours. But is it real?

Are you familiar with the term phantom offer? By the time you finish reading this article on phantom buyers and sellers, you will know a few tips and tricks to protect yourself against this false offer.

A phantom offer is an offer that really does not exist. It exists only in the mind of the person making it. While phantom offers are not common practice, you will find it more prevalent in a hot real estate market where it is easier to fall susceptible to it.

Here is a scenario of a phantom offer created by the seller themselves. You come in and make an offer on a home, and suddenly there is another offer better than yours.

In this scenario, the seller will try and drive the value of the property up to get you to increase your offer. They may go so far as to actually create a phantom buyer.

With a phantom buyer the seller will actually create an imaginary person with good credit. They will create a fake contract that includes a higher price than what you have been offering. However since you are not allowed to actually see and read the competing offers you cannot really tell if the offer is legitimate.

If they have an accomplice it might include a mortgage broker used to create an identity and credit of a real person who was not able to close on the property. All of this is all designed to drive your bid price up.

Another problem a phantom offer can present to you is more than just money. You may have to go in and eliminate some of the conditions of the contract that you were hoping to get.

For example, you may not get the closing date that you wanted. You might not get the seller to making improvements prior to closing, or have a condition on a home inspection and so on.

The thing about phantom offers is they are illegal. They are used strictly to drive the price and conditions of your offer up.

There is another scenario that a phantom buyer could be created. In this scenario, a third party can create a phantom buyer.

The sole purpose of this is to defraud the lender themselves. What happens is the seller offers a property for sale and a buyer offers to pay more than the asking price.

The settlement includes payments for unperformed services for unrecorded mortgages. The buyer takes title in the name of an individual with good credit and the seller doesn’t realize he’s been involved in a scheme to defraud the lender.

Most phantom offers involve the seller and really are trying to take advantage of you when it comes to buying their home. Always get the opinion of your real estate professional as to what to do in these cases. Their expertise will help you to not fall victim to these types of scams.

Larry Lloyd is an Ajax Realtor who specializes on the Durham Real Estate market. Feel free to contact Larry and his team when you are in the market for residential homes Durham or for any questions regarding the current real estate market.

What is the Importance of a Home Inspection?

When you want to buy or sell a home you will want to have a home inspection done. There are benefits to having this inspection done for the buyer and the seller. This article will tell you what those advantages are and what the importance of a home inspection is. You don’t want to buy or sell a home without knowing this information.

The importance of a home inspection for the buyer is just as important as for the seller. The benefits to having a home inspection done are that you will be able to find out everything about the home before you buy it. This will allow you to see the home up close so you know exactly what you are buying.

The advantages of a home inspection for the seller are that you will be able to find out about any previously unknown problems or potential upgrades so you can address them before you sell. It is always important to be aware of any issues in advance so you can disclose the problems to the buyer if you are not able to fix them. This will allow the transaction to go smoothly for everyone concerned.

Now that you know what the importance of a home inspection is you need to know how to get it done and what your role should be during the inspection. The seller is usually the one to get the home inspection done but the buyer can also have their own inspection done if they choose to. So if you want to get someone to inspect the home you will need to do a couple of different things.

One: You want to make sure that you hire a professional. Make sure that the inspector you use is a member of ASHI or American Society of Home Inspectors. This way you know you are getting someone that knows what they are doing. In Canada there are currently no mandatory certifications or legislative requirements for home inspectors, however there are industry associations such as The Canadian Association of Home and Property Inspectors (CAHPI).

Two: After the home inspection is done you want to make sure that you get a copy of the printed report. You can usually get the written report with no problems but you want to make sure that you ask about any photos that may have been taken during the inspection. It is a good idea to have a copy of both the report and photos.

Three: Be at the home inspection. You don’t have to be but if you are than you will be able to ask any questions you have. This is especially helpful for the buyer of the home because it gives you a chance to become more familiar with the home and it will add confidence that you are getting a good home.

Now you know the importance of a home inspection for the seller and the buyer. Always get this done before you buy or sell a home because if you don’t then you may run into problems later that you could have known about if you had just had the home inspection done.

John Carser is a professional Aurora real estate sales representative. Feel free to contact John for all of your real estate needs including Aurora Ontario real estate values and general market information.



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Vanessa Hudgens



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