To Buy or To Rent?

An eternal question asked by those looking for a home to move into: Is it a better idea to purchase a house or simply rent one? The answer cannot be generalized, and depends on certain factors such as:
· Your income (most important factor)
· Number of family members
· The location, city and current market value of real estate.
· The rent to emi ratio

The first question you should ask yourself is how long you plan to stay in the house you are looking for. If your purpose is permanent in nature, then yes buying a home is the best option. Yet, the choice continues to daunt us, so let us take a look at how you should compare and choose between these options:

1) Monthly expense

Compare how much you will have to pay towards your monthly rent and your equated monthly installment towards your home loan. The point is to have an overall expense estimate for the duration you have in mind.

2) Convenience of location

See whether the house you have chosen to purchase is located in fair distance of the schools and offices. If not, renting a home in the said area is a good idea, until you find a suitable home to buy.

3) Down payment value

When it comes to availing home loans, you must know that only 80% of your property's value will be funded by your bank, the rest 20% needs to be arranged for from your personal resources. This involves some prior planning and saving. Similarly in the case of a rental home, you will be required to pay an advance sum (an initial amount before you move into the place) which is usually 6 months to 1 year rent value.

4) Amenities check

Keep a checklist of the amenities you want and cross check it against the amenities you find in the house you are looking for. This will help you analyze if the house is worth investing in or renting.

5) Percentage of rising cost

Keeping in mind the rising cost of real estate and interest rate of your home loans, similarly the percentage increase in your rent; evaluate and compare which is affordable according to your income and choose the one that is most suitable to your family as well as your finances.

6) Investment advantage

The one advantage that comes automatically with purchasing your home is that you are making an investment. Even if you don't plan to sell or rent it in the near future, with the ever appreciating value of real estate your home is bound to increase its worth, through the times. Obviously, you don't enjoy this advantage in your rental home.

The choice is yours, but let it be an informed one.

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How Do Banks Decide on Your Loan Eligibility?

When you apply for a loan whether it is a personal, housing or mortgage loan, the first and foremost aspect banks look at, is your ability to repay. Although, there are other specific criteria to be fulfilled by every applicant, the following are the basic points or rather calculations based on which your loan eligibility is determined.

It is not all that difficult to understand how these calculations are arrived at, in fact if you are able to work it out on your own then you can find out what will be the maximum loan you can avail, irrespective of which bank you apply to.

1) IIR- Installment to Income Ratio

Banks understand that your loan value should not exceed your repaying capacity. This ratio is 33.33% to 40% of your monthly income. Using the IIR, how much you can borrow as well as repay will be decided by the bank.

For instance if you earn Rs.50,000 per month, then your IIR is Rs.16,500. That is, the maximum emi payable by you is not more than 16,500 per month. This determines your maximum loan amount, and will vary depending on the tenure you choose.

2) FOIR- Fixed Obligations to Income Ratio

This is perhaps the more popular calculation, the banks go by. The Fixed Obligations to Income ratio helps in determining if the applicant has any other loans he is repaying, while he applies for a new loan. Those loans which require more than 6 installments to be paid are the ones considered for FOIR. Let us see how it is done;

For instance, if your income is Rs.75,000 per month, and you have an auto loan running for which you are paying an emi of Rs.5000 and another personal loan of Rs.7500 per month. Considering that 50% of your income can be paid towards your loans,

We have,

50% of 75000 = Rs.37,500

Auto Loan Emi = Rs.5000

Personal Loan Emi= Rs.7500

So, your disposable income for this fresh loan is:

37,500 - 5000 - 7500 = Rs.25,000

Although FOIR is mainly a ratio, you need to look out for the value mentioned above. This will help decide how much you can afford to pay as monthly installment despite paying your other emis.

3) LTC or LTV - Loan to Cost or Loan to Value Ratio

This ratio is most often used for calculating an applicant's ability to repay a housing or a mortgage loan. Here, rather than an applicant's income, the property's value is taken into consideration. Around 60 to 70% of the value of the property is used to determine the maximum borrowable loan amount.

For instance, if the value of your property is Rs.1 Crore. Then the maximum loan amount you can avail based on your property would be Rs. 50 to Rs.60 lakhs. Of course, when it comes to determining your repaying capacity, your income will definitely be considered. The LTV ratio varies depending on whether all the aspects of the property is proper or not. Sometimes, even 80% of value is provided as funding depending on the application.

Most banks consider up to 60% of an individual's income can be paid towards monthly installments. However, it is always advisable to keep this percentage down to 40%. You don't want to seem too credit hungry when you go ahead with applying for a new loan. Every loan you pay or don't pay is recorded, and is made as a part of your credit information report. Your credit score is also based on it, and is one of the key factors for your loan to get approved.

Priya is a financial consultant with RupeeZone, visit http://www.noproblemcash.com/ you will find a whole lot of details on personal loans and how to make yourself eligible for easily availing one.

To check your personal loan eligibility visit  http://www.noproblemcash.com/?c=214594

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Why Do Hard Money Lenders Fail?

This vital pillar of our economy almost vanished when the economy and the housing market tanked about four years ago. Private lenders were left holding large inventories of real estate whose values were eroded by between 30% and 50%. Consider this scenario: A $200,000 mortgage loan balance, originally secured by a property valued at $285,000 (Loan to Value 70% [LTV]), was suddenly under-secured as the securing property value dropped by 40% to $171,000 (Loan to Value 117%). Conventional banks suffered somewhat similar consequences, albeit on a smaller scale. The difference was due to the credit analysis methods that were practiced prior to the collapse of the property market. On one hand, conventional lenders subjected credit applications to more stringent analysis that included borrower's credit history, character, income, collateral, ability to repay, stress testing, terms and economic conditions. On the other hand, Private lenders or hard money lenders, as they are popularly known, were mostly concerned with the value of collateral, paying very little attention to the borrower's ability to repay. This has now changed to a large extent. Many hard money lenders are applying more or less similar credit underwriting standards as the conventional lenders. The only setback for most of the hard money lenders now is lack of prudent underwriting skills. However, the good news is that they can outsource the underwriting role to professional loan underwriters, right here in the United States, at an affordable cost. Remote loan underwriting firms, whose teams consist of highly experienced ex-bankers, are well positioned to provide the most current loan underwriting techniques in the industry.

Here are a few roles that a hard money-lender can outsource to improve delivery times and credit quality:

1. Creating loan package - Application (Fm. 1003), Income, Credit, Asset documents, Policy of Title Insurance and Property Profile Report

2. Gathering and reviewing title information

3. Ordering and reviewing an appraisal

4. Loan underwriting for a private investor

5. Creating final documents and coordinating settlement or closing

Prudent credit underwriting, whether for conventional lending or hard money lending, should follow these simple underwriting guidelines:

1. Know your customer, character and credit history

2. Read the market conditions well

3. Ensure that a borrower has a reasonable stake in the deal

4. Understand borrower's indebtedness and sources of income or losses

5. Obtain adequate and easy - to- sell collateral

6. Test the borrower's ability to repay the loan

7. Impose simple and achievable loan conditions. Be aware of the prevailing environmental and economic conditions.

Franc Jo is a Senior Underwriter at Loans Underwriting LLC, the leading provider of outsourced Credit Underwriting support to lenders and funding solutions consultant to small businesses throughout USA. He may be reached at 3330 Pkwy Suite 324-178 Acworth, GA 30101, Phone 1-800-858-8593, and Website: www.repaircash.com

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Easy Financing Through Bridging Loans

As you might have probably thought, bridging loans are a short term funding option. The reason why the name bridging is used is because the loan will be used in merging the gap between a debt coming due. In short, the use of bridging loans or bridging finance as is commonly referred is a way of acquiring financing in a short timeframe and for a pressing matter. In most cases the pressing matter that will necessitate a bridging loan is a mortgage.

Just how does this loan work?

A bridging loan is used to help a person be able to complete a property purchase prior to them selling their existing property. This is common when shifting properties to move to a much larger house or moving to a new location. This is the reason the loan is of invaluable help as without it, a new property purchase would not be possible.

Although the financing that is made through the loan is of much help to the person in need, the loan is somewhat expensive when compared to normal loans as the time that the funding is required is short and of great importance. The bridging financing is said to be quite expensive as the rate of interest the money accrues is quite high.

• Where else could you expect to see the use of bridging loans in high numbers?

• When there are gaps in completion dates of a property

• When buying at an auction without cash at hand or the financing necessary to buy

• When needing to sell a property quickly after renovation.

Following the financial crisis that brought the world economy to its knees, banks are quite reluctant to lend as most of the customers are seen as high risk vendors. To avert this, use of bridging loans is becoming quite poplar as the money is only lent for a very short period and it comes back with quite a handsome interest.

For most lenders that qualify for the normal loans, it is advisable to take these loans as the alternative that is bridge financing is a very expensive affair. Income institutions, a monthly fee of 1.5% per month is charged, making the sum total be 18%, not to mention administration fees.

Among the people who are recommended to make use of the bridge financing include property owners, property developers and a person purchasing a property at an auction which needs proper financing. Some wealthy borrowers who are asset rich and who want to go straight and start lending can also get the financing.

Among the instances where bridging is recommended include: buy to let properties where the income amassed by the property can be used in paying back the high interest. Property investment is also a good way to look at this type of financing. In instances where banks take too long to approve a loan, especially when high amounts are required, bridging loans become the next best available course of action.

In as much as the bandwagon of the people advocating for bridge financing is concerned, it seems to be a fast growing market segment. It is however advisable that prior to signing up for this form of financing, a thorough evaluation of the exit strategy to use is made. Lack of an exit strategy means that you risk foreclosure of the property acquired as you might be unable to meet the monthly repayments of the loan.

Be sure to ask of the different alternative lending options from your financial service provider rather than sign up for the first available financing that is presented to us. If you have never done it, it is advisable to take some time to think through the bridging loans proposal and enquire about the minor details such as the cost of administration fees.

We are associated with a loan providing company of Supreme Finance. They are able to arrange short term property loan to fulfill your urgent need; Here, I penetrative to provide detailed information on bridging loan and benefits that suits your need.

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How to Keep Informed on Mortgage Rules and Regulation Changes

If there ever was a time when home loans were easy to qualify for, it must not have lasted long. These days, it feels like it is getting harder and harder to receive a home loan. This does not mean it is impossible to get a loan but the bank requires a lot of information from the borrower lately.

Keeping informed on changes to rules and regulations could stop homeowners from missing out on opportunities to lower their monthly payments, receive cash out of their homes and even purchase a larger house. Luckily staying informed is not difficult tasks with the many online publications that will even display on mobile devices like smartphones and tablets.

Finding Websites with Mortgage News and Information
If you want to stay informed, the first thing to do is find a website with the right information for you. Some websites are geared toward the homeowner and some are geared toward the mortgage industry professionals. You also want to make sure it is a mortgage website and not real estate, because a real estate website will speak more about changes to the housing market along with how it affects sales and purchasing. Mortgage rules and regulations are impacted slightly by the housing market but it should not be the main topic of discussion.

The features of a website can also draw you in, whether offering a mobile friendly option or presenting information in a certain way. This can make it easier to find what you want, when you want it. So once you have found a few websites you like, play around with viewing them on different devices and sign up for their newsletters (you can always unsubscribe later). Playing with the websites will give you a better feel for how they can help you even when you are on the go.

Knowing When to Work with a Lender
Although it is always a good idea to speak to a mortgage lender, knowing when to actually move forward could mean the difference between a large savings and a little savings. Mortgage rate trends will shift along with the rules and regulations. By following when the next shift in rates will be or reading about new mortgage programs that become available, along with the rules attached to those programs, you can make a better decision on when to commit to a new loan.

There are situations where loan programs change depending on who they are offered by. Whether a homeowners current loan is offered by the FHA, VA or some other government entity, shifts in regulations could mean shifts in insurance premiums as well as qualifications. This could be both leniency or more stringent lending rules. Being well informed, if a rule were to come into effect, you would know when your deadline would be to change over to a new program possibly with a refinance.

The Future of Mortgage Rules and Regulations
Looking towards the future will always benefit homeowners because mortgage rules and regulations are so well documented. They clearly state when they go into effect and who will be affected by them so homeowners can always plan in advance for upcoming changes or possibly opportunities to save money such as through new programs or refinance options.

Start finding the right option for you when it comes to mortgage news and information. There are many publications that can offer both friendly approaches to information and well as easy to use functionality. It may also be a good idea to follow a few so that you can match the information up between them.

There has never been a better time to stay informed on mortgage rules and regulations. The government is offering programs and incentives to refinance and there are plenty of investment opportunities available as well. Fred Bohman understands that homeowners and home buyers benefit from mortgage news and information so he provides articles to help them prepare.

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