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ARMs 2001: Too Much Cost, Too Much Risk
It used to be that adjustable rate mortgages -- ARMs -- were a good financial option for many borrowers. Combine low start rates with more liberal qualification standards than fixed-rate financing and ARMs could often be the most attractive mortgage option for many borrowers.
But ARMs have always been a compromise form of financing. Borrowers get some benefits, and so do lenders. For lenders the motivation is less risk: If the cost of money rises over time because of inflation, with ARMs interest rates also rise.
ARM start rates -- which typically
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last for six months or a year -- are traditionally lower than the interest cost for fixed-rate financing, but consumers give something up for that advantage: The possibility that in the future rates might
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How Will The Stock Market Plunge Impact Real Estate
The great ride on Wall Street is over, at least for the time being and perhaps for much longer. In the past year, says The New York Times, shareholder equity has fallen by an estimated $2.7 trillion, a big number by any standard and one which will undoubtedly influence the sale and financing of real estate in 2001.
Stocks, bonds, and real estate are sometimes seen as competing investment mediums, but the reality is that they are all tied together. If you like real estate as an investment option, you want folks on Wall Street -- and millions of investors and pension holders nationwide -- to do well because rising values benefit everyone.
Conversely, when stock values fall, investors and equity holders in other areas need to consider how they will be impacted.
As stock prices rose during the past decade investors gained two advantages: They could sell for cash or hold. In the first case bank accounts swelled, big downpayments became easy, more people competed for a limited stock of properties, and the result was higher prices generally and vastly higher prices
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How Is Your Credit Rating Calculated?
You hear about credit scores all the time, but why do lenders need them and how do they work?
Credit scores give your lender a benchmark that helps him or her determine the likelihood of your ability to repay your loan. But your score isn't determined by your lender; rather, a credit information provider calculates your score.
Your credit score will range typically between 600 to 800, with higher numbers indicating a stronger standing. Your score is based on only your credit report. Demographic information -- including your age, city of residency, employment, marital status, race, gender and national origin -- are irrelevant.
When it comes to your credit standing, the "kisses of death" include (surprise, surprise) mortgage foreclosure and bankruptcy, as well as vehicle repossessions. Being late on your electric bill last June is nothing to lose sleep about, provided you paid within 30 days. If being late on your bill payments is a consistent problem for you, however, you may find your reputation (in other words, your "credit history") standing in your way when you attempt to land a home loan. (For credit reporting purposes only bills 30 days overdue are regarded as late. However, it's wise not to wait until the last moment just in case a check really does get lost in the mail.)
The first time you see your credit report, you'll find listed all of your
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Avoid Surprises: Know Your Homeowner's Coverage
Most of us sign up for a homeowner's insurance policy when we purchase a home not only because of the protection it offers us, but also because of the "required reading" aspect of it to our mortgage lender. Those institutions lending us the money to make homeownership possible cover their bases by making sure their own financial investments are protected in case of fire or natural disasters.
But how much does the average homeowner know about what the typical homeowner's policy covers?
According to information available through the Insurance Information Institute and endorsed by the U.S. Office of Consumer Affairs, the Homeowners-3 (HO3) is the most common homeowner policy in the U.S. Some policies are more restrictive than others, so be sure to check up on just what your policy includes. For the purposes of generality, however, the HO3 will be used as an example here.
The typical homeowner's policy includes coverage for perils and losses due to fire, lighting, tornadoes, windstorms, hail, explosions, smoke, vandalism and theft. Those owning homes in coastal areas may want to pay
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