Selling Your House and Living off the Money

lets discuss the first possibility and the benefits and drawbacks that they might have.  Let’s take for an example eight $200,000 house which has been paid off after a 30 year period of time.  The house is probably appreciated over that 30 year period of time and has probably been a great investment for the owner.  Over the past hundred years houses have appreciated an average of 7% a year.  The person living in this house besides they would like to live in a smaller town house or condo any use the money received from the sales of this house as money they can use to live on for retirement.  This option is a great option for people that don’t want the stressor headaches that comes with owning a house.  When I talk about headaches I am normally talking about cutting the grass, cleaning the pool, and fixing all the other things that break over a period of time in a house.  When moving to an apartment or condo and paying rent you lose many of these stress factors.  You don’t have to cut the grass and you don’t have to fix up the house.  That will be your landlord’s job or the job of the apartment complex.  As you can see there are deftly some benefits to this scenario.  The question is how much are you tied to the house that you’ve been living in for the past 30 years.

Retiring in the House You Have Worked Hard to Pay off

My grandmother worked very hard to pay off a 30 year mortgage which he finally did accomplish about five years ago.  When I asked my grandmother if she wanted to move and use the proceeds from the house to begin a retirement she refused.  She explained to me that the house that she worked so hard to pay off was very important to her because that is where she spend. some of the happiest days of her life.  my grandmother always knew in her heart that she would never leave this house until she had to.  She saved money in mutual funds as well as for 401(k) plan that she had at work.  She had enough money to live on and got to stay in the house that she wanted.  Some people are so happy where they live and the memories that they have they refuse to go live in a condo or apartment typesetting.  These changes can be very hard for an elderly person which I totally can understand.  All these factors should be considered when deciding what is best for you and your family.

When borrowing money for a mortgage you might want only borrow as much as you really need so you can pay off the mortgage much faster.  This will give you the freedom of making one of these two decisions when you decide it is time to retire.  So some people might ask the question how much money can I borrow for mortgage and some people might ask the question what is the minimum amount of money I should borrow for mortgage?

How Much Money Should I Borrow

Normally the difference between a 15 year mortgage and a 30 year mortgage is about 15% higher. The real question is is it not better to get a 30 year mortgage and just make extra payments when it is convenient for you or your spouse. This will take much dedication and discipline to accomplish.if you can afford to have a 15 year mortgage you should definitely do that. The 15 year you will save will help you reach the financial freedom that you are looking for in a shorter period of time. Paying off a mortgage can be a very rewarding feeling and can help your family live a much easier life. I would recommend that you borrow from the bank only as much money as you need. Many people make the mistake of getting huge mortgages and end up squandering the extra money away. If you are not disciplined enough, and have never been good at saving money you should try to get a 15 year mortgage because it will force you to be a little bit more responsible.

Benefits of a 30 Year Mortgage

The major benefits of a 30 year mortgage is that it lowers your monthly payment which intend lowers your monthly stress. Stress can be a major factor when making a house payment. You should consider this when trying to apply for a mortgage and trying to figure out how much can I borrow for a mortgage.normally the interest rates for a 15 year mortgage are about a half a percent better than a 30 year mortgage. The 30 year mortgage creates a larger tax deduction for a longer period of time. This is a benefit as long as you understand that you’re paying a lot more money to the interest of the house instead of the principal. If you are not sure that you can make or afford a 15 year mortgage after the amount has been calculated use should take a 30 year mortgage and just make a larger payment when you can.

Biweekly Mortgage Payments

A new system has been developed which can reduce your mortgage payments by a total of eight years. This is done by paying your mortgage biweekly. many people don’t understand how this process works and why banks offer this form of payment. It’s actually very simple if you make your mortgage payments biweekly you will end up making 26 monthly payments during the year. These payments will be normally half of a normal one month mortgage payment. The major difference is that on a 26 biweekly schedule form of payment converts to 13 actual monthly payments. By making that one extra monthly payment per year you reduce your mortgage by eight years which normally adds up to about 25 to 30% savings.

Finding Houses the are Owner Financed

With the current real estate market there are many home owners looking to dump houses.  This can be a great opportunity for people that have bad credit.  Many owners are willing to do lease options and owner financing on the house just to get rid of their headaches.  This is something you can simply ask for when discussing a purchase on a house.  I think in this market you will be very surprised to see what deal you can have.  Don’t be afraid to ask the owner these questions to see what option you might or might not have.  Banks might not care but I believe people normally do.  A person selling a house might be more inclined to listen to you and your reasons on why you have bad credit and be able to work with you.

Looking for Homes with a Lot of Equity

There are more houses on the market now with built in equity than at any other time in the real estate market.  Banks are much more willing to excuse your credit situation if you have a house that you are purchasing with a ton of equity.  Lets say you find a house for sale appraised at $200,000.00.  You can purchase the house for $150,000.00 due to the slumping market and a motivated seller.  You have an additional $25,000 to put in as a down payment.  This means the bank will have to finance $125,000.00 on a house that is worth $200,000.00.  You have a lot better chance getting approved in this scenario than without the equity or the credit. So when trying to figure out how much can I borrow for a mortgage make sure you take the equity of the house into serious consideration.

Benefits of Borrowing Money on a Second Mortgage

Getting a second mortgage can have many benefits if you are using the money for a good reason.  One good reason is adding another room in the house.  You are pulling money out of the mortgage but adding great value to the house itself.  This sometimes can help you make an additional $25,000 on a house.  There has been a few people that I have run into that have added a Grandmother quarters to there house and had one of there family members move in.  This can be a very interesting scenario and helpful to both parties.  The elder parent or relative will be able to live there for a lot less money compared to an apartment or other house.  The person taking out the second mortgage can add a lot of value to the house and have the renter or relative pay the mortgage plus some in most cases to help lower there bills.  It can be a very interesting scenario and I have personally seen it work very well.  This is a great reason to take out a second mortgage.  If you notify the bank that you are taking the second mortgage to add on to your property many times the bank is a lot more lenient to have an approval go through.  They will actually reassess the value of the house with the changes after the construction has been completed.  If you notify the bank that you already have someone that is going to move in they may also calculate the income you are receiving from the rent to your income which can make an approval a lot easier to obtain.  So knowing how much you can borrow on a second mortgage is determined on how much equity you have in the house and sometimes what you intend to do with that money once you receive it.

Flipping Houses and Borrowing Money for a Mortgage

Many people believe that flipping houses are a thing of the past but the truth is people are still in the flipping houses business. With foreclosures skyrocketing people are out there trying to flip houses and in some cases making huge profits.  How are they getting approved for these mortgages.  They are getting approved by going to private lenders and offering up a lot but intern getting a lot back.  I have heard mortgages in the 11% range for people flipping houses and borrowing money from private lenders.  Crazy some might say or brilliant others might think.  I guess the real question is it depends how good you are at selling the houses and how fast.  A mortgage with an 11% interest rate is not so bad if you can buy a house and have it sold withing 30-60 days while making a nice $30,000-$40,000 profit.  trust me when I tell you that it is being done and being done daily.  This housing market is prime for these type of loans.  The private lender is happy and so is the person flipping the house.  It becomes a win / win scenario for both the private lender and the borrower. So when you ask the question how much money can I borrow for a mortgage one of the real answers is how good are you in finding a good house at a below market price.

Credit Score and How it effects How Much you can Borrow on a Mortgage

Credit Scores and have gone down with the current mortgage crisis but the problem is mortgage companies are making the standards of getting approved for a mortgage a lot more difficult. A  home buyer used to be able to get approved with a credit score of 620 and about 10% equity in the house.  The score now is around 670 and with that 670 score you will probably get approved with a 20% down payment.  That is a huge difference.  This is part of the reason why the housing market is in the doldrums.  People are losing there houses left and right and people that are trying to buy them cannot get approved.  If your score is under 670 it will be hard for you to get approved at a decent interest rate.  One thing that you can do to better your chances if you fall below the cutoff point is to get a co-signer who is above the 670 score.  The bank is more likely to approve you with two people on the lone as long as one has a score over 670 and your score is not much less.  This way if you don’t make the mortgage payments they have two people they can go after.

Appraisals and how they Effect How Much you can Borrow for a Mortgage

Before a mortgage can be approved the bank sends out their own individual appraiser to see what the real value of the house is.  They appraisal normally cost you about $300.00 and the appraiser goes to the house to see what the square footage is and the condition the house is in.  He than goes and pulls comps which are recent sales numbers of what houses have sold for in your area in the past year.  This is not an exact science due to the fact that if a house is sold through a foreclosure the value of the houses in the area will be effected.  Also if you are in a secluded neighborhood you might not have a recent sale to go by.  These are all major factors when trying to figure out how much can I borrow for a mortgage.

Mortgages are first determined by the Value of the House

A bank is not going to give you a $100,000.00 on a house that is worth $50,000.00.  The opposite is also true, the bank will love to give you $100,000.00 mortgage on a house thats worth a million dollars.  Banks want as much equity in the house as possible to make sure there backsides are covered. In early 2000 Mortgage companies were giving out tons of loans on houses that were over valued to not credit worth individuals.  This stupidity is what caused the crisis that we are in today.  The banks got greedy and now are stuck lose money left and right on bad mortgages and foreclosures.  They are definitely not the only people that have suffered.  Borrowers thought that the banks new what they were doing and assumed that they would be able to afford these 100% financed mortgages and housing properties would continue to skyrocket.  We all know now that this is not the case.  As a rule of thumb, the lender does not want to finance more than 80% of the true value of house so if the value of the house drops they are not stuck losing a lot of money.  They will increase the percentage if you have great credit and or if you have a lot of cash or equity in other items this way they know you can find a way to pay the mortgage.  They also take into consideration how much money you make per year and how much other outstanding bills you owe to creditors.  Some of these bills for example would be credit card debit, other mortgage debt, student loan debt, and car payments.  All these factors come into consideration when answering the question how much can I borrow for a mortgage.