What Is The Debt-To-Income Ratio (DTI)?

http://bucket.wistia.com/medias/wnye5x4yva?embedType=async&videoFoam=true&videoWidth=640 Measuring your existing debts against your existing income is one part of a lender’s required assessment of your ability to repay a loan. Like the video says:  debts are existing financial commitments; a car payment is a debt a grocery bill is not. To calculate your debt-to-income ratio add up your monthly debt payments and divide them by your GROSS monthly income. (Gross income is generally the amount of money you earn BEFORE taxes and other deductions.) The Federally-established d...
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What Is A Qualified Mortgage?

http://bucket.wistia.com/medias/egxxmwjb58?embedType=async&videoFoam=true&videoWidth=640 As this video explains,  Federal laws put into effect in 2014 and  supervised by the Consumer Financial Protection Bureau define lending practices and loan terms for a new category called “Qualified Mortgages.” They provide stable loan features for consumers and improve legal protection for lenders who follow the guidelines. These guidelines require lenders to assess each borrower’s ability to repay their mortgage loan. As of 2014, guidelines require that a borrower’s monthly DEBT - i...
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What Does Ability To Repay Mean?

http://bucket.wistia.com/medias/wmc87delfy?embedType=async&videoFoam=true&videoWidth=640 What are the “Ability to repay” rules about? In a nutshell, as this video shows, new laws require lenders to make a good-faith assessment of a borrower’s capacity to pay back their loan over time. It’s a longer-term view that goes beyond immediate income, debt and credit rating. These new Federal laws- supervised by the CFPB - require lenders to ask more questions - about income, assets, employment, credit history, and monthly expenses - as they relate to the proposed loan. For exa...
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What Is Equity?

http://bucket.wistia.com/medias/hxqsa0oid0?embedType=async&videoFoam=true&videoWidth=640 Equity is the value YOU own in property such as a house. It’s the difference between what’s OWED and what the property is WORTH in the current market. The example this video shows - you have a house worth $300,000 today and you owe the bank $200,000.  Your equity would be $100,000. If the house is valued at $500,000 in five years, and you still owe $150,000 your equity will be $350,000. Equity grows if the property value goes up or if the amount owed goes down.  The key thing to remembe...
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What Is “Prime”?

http://bucket.wistia.com/medias/9pb03qs82b?embedType=async&videoFoam=true&videoWidth=640 The Prime Lending Rate - sometimes just called “Prime”  - is the interest rate that banks charge each other for overnight loans. Some consumer rates - like ARMs - are set in relation to Prime. In the US, Prime is affected by the Federal Reserve lending rate to banks; historically, Prime is about 3 percent above the Fed rate. The video shows  an example. The Federal Reserve loans to Bank A at 1% Bank A loans to Bank B at 4% Both banks - A & B - will recalculate variable-rate l...
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What Are Discount Points?

http://bucket.wistia.com/medias/v8grj42uwo?embedType=async&videoFoam=true&videoWidth=640 Discount points allow you to lower your interest rate. While this video simplifies things to help you remember, “points” are essentially prepaid interest with each point equaling 1% of the total loan amount. Generally, for each point paid on a 30-year mortgage the interest rate is reduced by 1/8 (or.125) of a percentage point. When shopping for loans, ask lenders for an interest rate with 0 points and then see how much the rate decreases with each point paid. Discount points are smart if you pl...
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What Is A Mortgage?

http://bucket.wistia.com/medias/j9iawfe12j?embedType=async&videoFoam=true&videoWidth=640 The original phrase “mort gage” translates as “death pledge”! But as this video explains, a mortgage is a loan obtained to purchase real estate. The "mortgage" itself is a lien - a legal claim on the home or property that secures the promise to pay the debt. All mortgages have two features in common: principal and interest. The principal is the amount you are borrowing which is “secured” by the lender’s claim on the property. The interest, usually stated as the percentage rate is the additional ...
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Can I Pay Off My Loan Ahead Of Schedule?

http://bucket.wistia.com/medias/qpwgv0e9tz?embedType=async&videoFoam=true&videoWidth=640 Usually, Yes. Like the guy in the video says, by sending in extra money each month or making an extra payment at the end of the year you can accelerate the process of paying off the loan. When you send extra money, be sure to indicate that the excess payment is to be applied to the principal and keep records. Remember that payment applied to loan principal is not tax-deductible. Most lenders allow loan prepayment, but some loans may have prepayment penalties. Ask your lender for details.
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What Are The Advantages Of 15- And 30-Year Fixed-Rate Mortgages?

http://bucket.wistia.com/medias/utn333fk9w?embedType=async&videoFoam=true&videoWidth=640 For both, as we show you in this video, compared with other options,  with fixed rates, housing costs won’t be affected by interest rate changes and inflation. With A 30-Year Term: In the first 23 years of the loan more interest is paid off than principal meaning larger tax deductions. As inflation and costs of living increase mortgage payments become a smaller part of overall expenses. With A 15-year Term: Loan is usually made at a lower interest rate. Equity is built faster because early payme...
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What Is Included In A Monthly Mortgage Payment?

http://bucket.wistia.com/medias/0sssvc98vq?embedType=async&videoFoam=true&videoWidth=640 The monthly mortgage payment mainly pays off principal and interest. But most lenders also include local real estate taxes homeowner's insurance, and mortgage insurance, if applicable. If you are refinancing compare what is and isn’t included in your financing options. Watch this video and it’ll make sense.
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