Student Loans: Congratulations! You're Broke

 
The cost of going to college has been increasing much faster than the rate of inflation. To attend a small, private college costs $20,000 a year minimum. And if your son or daughter just got an acceptance package from Harvard, you’re looking at $40K by the time you factor in pizzas in the dorm room. You got that kind of money lying around? Not many people do.
 
You want the best for your child. It’s natural. And that means you want those kids to go to the best schools they can – even if it breaks the bank. Welcome to the world of financial aid, government grants and student loans.
Over 68% of all college students receive some form of financial aid. Scholarships are always nice. They don’t have to be paid back. Work-study is good. Your child works in the cafeteria, library or somewhere else on campus to earn walking-around money.
 
Tuition and living (a dorm room) are the two priciest items you’re looking at for the next four years (unless you’ve got a few more future graduates coming through the pipeline). Start by talking to the financial aid people at your child’s school of choice to see if there’s any scholarship money, grant money or other cash available through the school itself. You may get lucky.
 
Or, maybe not. In either case, chances are you’ll be talking to a private lender to borrow cash for those tuition bills. Ask the financial aid officer to whom you speak for recommendations on lenders. These professionals may be able to point you in the right direction.
 
Shop around. You’ll find the best deals on government-insured loans. These are loans backed by the federal government. That means if the borrower defaults on the loan, the taxpayers pick up the tab. (You pay one way or another, that’s a fact.) Government-backed loans are easy to get, rates are set but different lenders can set additional terms – earlier payback start date, no rearranging existing loans to attend grad school – there are differences.
 
You also may find that government-backed loans are unavailable through your local bank. Congress does limit the amount of risk it places on the backs of taxpayers. In this case, go for a collateralized loan to receive the lowest possible rate. A line of credit on your home is the best way to go. That way, the money is available when you need it but you don’t pay interest on that money until you actually use it. Saves a ton on interest charges.
 
Always read the fine print, especially if you’re taking a collateralized loan. Your house is at stake and some unscrupulous lenders are more interested in repossessing your home than getting your kids through school. Buried in the boilerplate, somewhere, is clause 12.3, sub-section C that states that if you’re late with a single loan payment, the lender can begin foreclosure proceedings to get your home. Not good.
 
However, you don’t have to worry about these unethical practices if you go with your local hometown back, talking to good ol’ Bob about a government-backed loan for your freshmen offspring.

Elizabeth Warren attempting to explain why Student should pay less interest on loans.

How to Use a Mortgage Calculator for Interest Only Payments

How to Use a Mortgage Calculator to Calculate Interest Only Payments

If you use our Mortgage Calculator, you will be able to figure your exact mortgage payment. Even from your mobile device. And see an optional amortization table by checking the box 'amortization schedule'. An interest only payment is easy to calculate, but if it is an ARM then first you must know the Index, Margin, and Caps to determine your rate.

 

Mortgage Rate Lock Advisor May 8, 2014

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10 year treasury yield has rebounded to 2.61% beginning May 5th after Ukraine situation stabilizes. Mortgage rates tick up ever so slightly.   

It is recommended to lock.

How Does a 5/1 ARM Work?

Mortgage lenders offer ARMS, or 'Adjustable Rate Mortgages' to help enable home buyers and owners find an acceptable loan product to meet their needs. The vast majority of mortgages are fixed rate loans such as 30 year and 15 year mortgages. But in certain situations an ARM offers many advantages under certain conditions. The first advantage is that ARMS offer lower rates, usually 1% less than the prevailing 30 year fixed rate. This can save a substantial amount of money every month. Arms are fixed for a certain period of time. ARMS usually have terms of 3,5,7, and 10 year fixed periods. All ARMS are a 30 year term so the term is 30 but the rate can change AND THAT MEANS YOUR PAYMENT CAN GO UP.

Example:

5/1 Arm- The "5" designates how long the ARM is fixed. The "1" designates how much the rate can change every year AFTER the initial fixed term of 5 years.

But there is a very important question you should ask your lender and that is how much the rate can move on the first adjustment, this is the adjustment that happens after 5 year initial fixed period is up. Most of the time, if the ARM is an agency product the maximum first adjustment is 5%. So if you bought a home using a 5/1 ARM at 3.5% and the day after you bought your home rates went to 10% for 6 years, the your rate would still be 3.5% for five years, but on the 6th year your rate would go to 8.5% because this is your first adjustment and rates can move up to 5% on the first adjustment. Let's say in year 7 the prevailing rates went to 1% and stayed there for a decade. Then you loan would only 'fall" 2% per year since the adjustment cap is 2% per year,

 

Terminology you should know and understand before you accept an ARM mortgage:

"Start Rate" This is the initial fixed period of your loan, in this case 5 years.

"First adjustment" This is the first adjustment after the start rate expires and usually has a cap of 5%

"Annual adjustment" This is the adjust that happens every after the initial period and first adjustment. This is usually capped at 2% per year up or down.

"Index" This is always tied to the LIBOR or T-Bill. Beware of any ARM that uses a different index. It's probably a set up for a really disastrous loan.

"Margin" The margin is added to the index to calculate your "fully indexed rate"

"Fully Indexed rate" is Index rate + Margin rate and rounded to the nearest 1/8th. 

"Adjustment date" The calculation above happens on an adjustment date agreed upon in the note. Usually your anniversary date.

"Lifetime CAP" This is the rate that your rate can never exceed.

 

To find out almost an INDEX RATE TO CALCULATE ARM RATES you can find that on Checkrates.com  

Can I Have Two FHA Loans? I Already Have One FHA Mortgage, Can I Buy Another Home?

The FHA has some pretty flexible guidelines for allowing two concurrent FHA loans. Many people use the FHA mortgage for it's very liberal down payment requirement of 3.5%. Though they will allow it, you must meet certain criteria and have one of the reason below to do it. Hud has issued the following guidelines:  

  • Increase in family size – There must be an increase in family size in which their current house can’t support the new family member(s). You will have to prove the increase. Also, you must have 25 percent equity in your current home or pay it down to 75% LTV (loan-to-value).  An FHA approved appraiser must be used to determine such new value.
  • Relocation – If the borrower is relocating and it is established that they aren’t in reasonable distance from their current property. Keeping in mind that reasonable can be defined differently from any lender.

Note – If that borrower(s) returns back to the same area, they are not required to re-establish residency in that property in order to have another FHA insured mortgage.

  • Vacating a jointly owned property – A borrower my leave a property and be eligible for another FHA loan if the co-borrower is to stay in the same property that is being vacated.

A good example of this is because of a divorce and that the vacating spouse needs to buy a new home.

  • Non-Occupying co-borrower – If someone previousily co-signed for a family member or relative while using a FHA loan.  This type of FHA loan is called a non-occupant co-borrower loan. This borrower would still be eligible to purchase their own home using a FHA mortgage.

If you do not meet at least one of these criteria, it will not be approved by your lender because the FHA will not insure the loan. Contact your mortgage lender to find an acceptable alternative. For instance, you may qualify for a VA mortgage or a conforming mortgage with 3% down. There will be a lot of weight given to how long the original home has been owned and moving must make sense to the underwriter. Additionally, if it appears to the underwriter that the loan is being used to build a rental home portfolio, the mortgage will likely be denied.

What is a mortgage?

Many people believe a mortgage is the same thing as a loan and that isn't quite true. A mortgage is the document that provides security for the loan. A loan is made using a promissory note and in that document it allows for a deed of trust to be created which turns the property into collateral for the loan. So when you close on a mortgage you will typically sign two forms. The first one is a promissory note and the second one is called a deed of trust. The deed of trust is also called a "mortgage" and it is usually filed in the county where the property is located to let everyone know that someone else (usually a bank) has a security interest in the property.

What Is an SBA 504 Loan?

SBA 504 program

The SBA or Small Business Administration 504 program is typically meant for the small businesses that contribute to the development of the community. The loans are granted for major fixed assets like building or land and they are directed towards the development of infrastructure and other facilities in a community. The small businesses can avail this loan though CDC or Certified development Company which is a non-profit organization directed towards the development of economy of a particular region. The CDC work with SBA and private sector lenders to finance the small businesses. The overall idea is to bring about a viable change in economically weaker sectors by granting loans at a fixed rate. 

SBA 504 program is especially meant for the businesses owned by women, veteran, retired person, rural businessmen, minorities and other designated businesses who operate in the sectors that are economically backward. There are about 270 CDCs working in the whole United States with each CDC being assigned to work in a specific geographical region. A typical SBA loan proceeds like this – the private sector being the major lender granting up to 50% of the total project cost. CDC providing 40% of the project cost guaranteed by 100% debentures of SBA and finally the remaining 10% has to be contributed by the entrepreneur of the small businesses.  The loan is granted for a long term and the interests are charged at a fixed rate and the loan assets are held as collateral.

SBA 504 loan program eligibility

There are certain eligibility criteria to be fulfilled before you qualify for a CDC loan.

They are as follows:

·       The businessman or woman must be a citizen of the United States and the business must operate in the territory of United States.

·       The business has a net worth of less than $15 million dollar and a net income of less than $5 million after paying taxes in the preceding two years.

·       The bigger businesses are not eligible for the loan and also such individual businesses that have the resources to meet the total cost of the project would not be granted the loan. It must be realized that the loan proceeds are especially meant for the economically backward sectors of the community and small businesses that are unable to meet the cost of a particular project individually.

·       The businesses must operate for profits so that the cost of the loan can be met up by the businesses within stipulated time. To operate for the profits you have to have a feasible business plan. Before submitting your proposal you must carefully pan about the project which must be endowed with the twin aspect that it would generate money for the business as well as contribute to the overall development of the community as a whole.

·       The personal history of the businessmen are also taken into consideration so as to ascertain whether they want to run a clean business, whether they are paying all their taxes and above all have an ethical integrity and willingness to repay the loan in time.

It is widely known that the SBA 504 loan project is meant for the overall development of individuals and the community as a whole.The small businesses can avail this loan though CDC or Certified development Company which is a non-profit organization directed towards the development of economy of a particular region. The CDC work with SBA and private sector lenders to finance the small businesses. The overall idea is to bring about a viable change in economically weaker sectors by granting loans at a fixed rate. Most SBA loans are granted through a community bank which do a very good job at walking a small business through the process. Many larger banks such as Bank of America or Wells Fargo also make SBA loans. 

SBA 504 program is especially meant for the businesses owned by women, veteran, retired person, rural businessmen, minorities and other designated businesses who operate in the sectors that are economically backward. There are about 270 CDCs working in the whole United States with each CDC being assigned to work in a specific geographical region. A typical SBA loan proceeds like this – the private sector being the major lender granting up to 50% of the total project cost. CDC providing 40% of the project cost guaranteed by 100% debentures of SBA and finally the remaining 10% has to be contributed by the entrepreneur of the small businesses.  The loan is granted for a long term and the interests are charged at a fixed rate and the loan assets are held as collateral.

Remember that the SBA 504 loan project is meant for the overall development of individuals and the community as a whole. The best way to consult with an SBA lender in your community is to search for one at Checkrates.com