Home Loan Articles

Bank of America is making mortgage headlines again by introducing three new loan modification improvements that are specifically designed to assistant military personnel who are behind on their house payments. The three new changes are:

• A program designed to help reduce principal on loans for military members who are behind on their payments when leaving active duty.
• A new 4% mortgage for members who are eligible for SCRA (Servicemember Civil Relief Act) protection.
• The creation of a special customer service department that specializes in working with military customers.

Bank of America wants to specifically help military members who are coming off active duty and find themselves behind on their mortgage. The mortgage giant wants to follow the example of HAMP (Home Affordable Modification Program) and offer several different levels of solutions to help customers. Bank of America will first be able to reduce the principal owed on a mortgage and then, as needed, will also attempt to reduce the interest rate and terms of the loan. Additionally, Bank of America will reduce mortgage rates for active duty military personnel to 4% instead of the standard 6% mandated by the SCRA program. The reduced 4% mortgage rate will stay in affect for one year after coming off active duty.

Bank of America is essentially taking the Servicemember’s Civil Relief Act (SCRA) and beefing it up a little bit when it comes to the mortgage protections provided by the act. The SCRA is designed to ease some financial burdens on family members who have one or more service members on active duty. It does this by protecting service members from eviction while on active duty, helps prevent against foreclosures while on active duty and even limits the interest rate that active duty service members can pay on credit card debt that was incurred prior to be called to serve. Normally the SCRA is only available to active duty service members and then terminates anywhere between 30 to 90 days after ending active duty, but Bank of America’s principal reduction program extends this to 12 months. Details of the SCRA can be found at the official Servicemember’s Civil Relief Act overview page.

These new solutions will be available to customers starting on April 1st. Bank of America will only be able to offer these loan modifications to mortgages it services but is working to extended it to mortgages owned by other mortgage services. The new military customer service department will consist of employees who are specially trained in the SCRA program. The Bank of America military customer service unit can be reached by calling 888-325-5357.

Overall, Bank of America’s modifications and the creation of a new customer service department should prove to be a good thing for service members who are struggling with home loans. Once Bank of America’s program goes into place other banks will surely follow their lead and begin understanding that the SCRA does a lot of good but doesn’t always go far enough. To be competitive you can expect other banks to also make their own special military personnel programs and even establish their own military customer service areas in the future.

When you decide the time is right to buy a home it can be one of the biggest decisions you will ever make. It is an exciting time. But, before making decisions too quickly, you need to be cautious and take the proper financial steps to ensure your financial investment is successful. You must have your financial affairs in order and know what you can afford.

The first thing you should do when considering the purchase of a home is to prequalify for a mortgage. There is no cost associated with the prequalification process. Your mortgage lender will need your financial information such as income verification, property appraisal and credit history. After going through your finances, your lender will begin the process and will be able to tell you how much you will be able to borrow. By going through the prequalification process, you will know exactly how much you can afford, saving you the trouble of looking at homes that are out of your price range. Prequalifying has a few benefits. First, it will give you the power to negotiate with a seller which may save you thousands of dollars. Second, prequalified buyers are given preference over others in a multiple offer situation. Also, you will need to be prequalified in order to work with a realtor. Finally, you will be applying for the correct loan amount based on your prequalification.

Next, you must set a home buying budget. Although prequalification will help in determine how much you can borrow, you must go through your finances and determine what you actually can afford. Decide on the features you would like for your new home to have. Then set a prioritized list of those features. Decide how much you can afford for the downpayment. A typical downpayment can range from 5% to 20%. Often, the seller will pay the closing costs but you will need to factor those into the budget if it is your responsibility to pay closing costs. You should also take into consideration that your mortgage should be no more than 25% to 33% of your monthly gross income.

The next step in buying a home is to get preapproved for a mortgage. The process of getting a preapproved mortgage loan occurs after you have found a home. This process is similar to prequalification, but is much more thorough. Your lender will review your financial history in great detail. You will most likely be required to go through an application process. This process is unique to each lender. One lender might preapprove you for an amount less than another lender would. Different lenders have their own underwriting and preapproval process for determine how much money to lend. You can use your preapproval amount as a bargaining tool in negotiating down the price of the home you have selected. Sellers will often come down a few thousand on a home if they know they have a definite deal.

Following these steps will help you make smart choices when buying a home and help you avoid becoming “house poor” by buying a home you couldn’t really afford. You will have a better idea of what your finances look like and what your finances will be like once you buy a home. You will also be in a better position to bargain with the seller once you have taken these steps.

For home buyers there has not been a better time to go house shopping in the past several years. Falling home values, an increase of homes available on the market and record-low mortgage rates have made it a buyer’s market when it comes to houses. But whether you’re a first time home buyer, you’re looking to upgrade to a larger house for your family or you’re looking to downsize for retirement, there are a few things you need to do first.

Before you contact a real estate agent, go looking for homes or even try to figure out your budget for a new house you’re going to want to get a pre approved (or pre approved) loan letter from a bank or lending institution and to do that you have to do some work.

When you first begin investigating how to buy a home you’ll quickly learn that home sellers and realtors strongly advise you to get a letter of preapproval or prequalification from a bank or lender. Some organization use the two terms interchangeably, but most financial institutions clearly recognize a preapproved home loan vs. a prequalified home loan.

Prequalified Mortgage Loan

Getting prequalified for a mortgage is relatively simple. You call the mortgage department of your bank or lender and explain that you would like to get prequalified to borrow money to buy a house. They will ask you some basic questions, they may require a few minor pieces of paperwork such as a copy of a paycheck or other general proof of income. They will ask you a little bit about your current debts, obligations and living situation. It is a relatively short process. Once your are done the bank or lender will give you an estimate amount of money they would be willing to loan to you based on the conversation and information you provided. The amount will usually be sent to you in a prequalification letter and the qualification is usually only good for 60 or 90 days from the date of being issued. To get prequalified for a home loan usually doesn’t cost anything but it also doesn’t prove very much. There is no commitment on the part of the bank to loan you the money.

A little knowledge will help you save thousands when you buy a home.

Preapproved Mortgage Loan

Getting preapproved for a loan is much more difficult, but it puts you in a much better bargaining position if you find a house you want to buy. The mortgage preapproval process is much more stringent than the prequalification process and it will require you to provide lots of proof of income including multiple paycheck stubs, federal tax statements and they will most likely run a credit report. After all of that information has been gathered by the bank they will let you know how much they will be willing to give you.

With a preapproved mortgage loan the bank is essentially committing to give you a loan for a specified amount, with the understanding that the borrower can afford the terms they list. This puts you and your realtor in a much better bargaining position if you find a home that you want to buy. If that same home is being bid on by three potential buyers and you have the only preapproved mortgage loan letter then the sellers will most likely sell the house to you because they stand a much better chance of having the sale go through.

Remember that a preapproved mortgage loan is a commitment, but not a 100% guarantee that a lender will loan you the money. The bank can still deny you the loan if they don’t feel that the house is valued correctly, there are irregularities in the title search or if additional financial checks turn up other issues.

When working for a bank to get a pre approved mortgage loan you want to be upfront and honest because anything found at the last minute could cause the bank to drop all commitments to you and not be willing to work with you again. At that point you’re back to square one in the buying process and you probably wasted a lot of your time and energy as well as that of your real estate agent.