Comparison of a 30-Year vs #mortgage #calcualtor


#15 year fixed mortgage rates

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Comparison of a 30-Year vs. a 15-Year Mortgage

A bewildering variety of mortgages is available, but for most homebuyers there is, in practice, only one.

The 30-year-fixed mortgage is practically an American archetype, the apple pie of financial instruments. It is the path that generations of Americans have taken to first-time home ownership. According to the Mortgage Bankers Association, 86% of people applying for purchase mortgages in February 2015 opted for 30-year loans.

But many of those buyers might have been better served if they had opted instead for a 15-year fixed-rate mortgage ; the 30-year’s younger, and less popular, sibling. The loans are structurally similar – the main difference is the term. (See also, A Guide to Buying a House in the U.S. )

A shorter-term loan means a higher monthly payment, which makes the 15-year mortgage seem less affordable. But, in fact, the shorter term actually makes the loan cheaper on several fronts – over the full life of a loan, a 30-year-mortgage will end up costing more than double the 15-year option.

How the Term Affects the Cost

The main driver of higher costs is time. A mortgage is simply a particular kind of term loan – one secured by real property – and in a term loan, the borrower pays interest calculated on an annual basis against the outstanding balance of the loan. Both the interest rate and monthly payment are fixed.

Because the monthly payment is fixed, the portion going to pay interest and the portion going to pay principal change over time. At the beginning, because the loan balance is so high, most of the payment is interest. But as the balances gets smaller, the interest share of the payment also declines, and the share going to principal increases. (For further explanations, see Investopedia’s tutorial Mortgage Basics .)

In a 30-year-loan, of course, that balance shrinks much more slowly – effectively, you’re renting the same amount of money for more than twice as long. (It’s more than twice as long, rather than just twice as long, because in a 30-year mortgage, the principal balance does not decline at as fast a rate as in a 15-year loan.) When the interest rate is 4%, a borrower actually pays almost 2.2 times more interest to borrow the same amount of principal over 30 years compared to a 15-year loan.

Differences in Interest Rates

Moreover, because 15-year loans are less risky for banks than 30-year loans, and because it costs banks less to make shorter-term loans than longer-term loans, consumers pay a lower interest rate on a 15-year mortgage – anywhere from a quarter of a percent to a full percent (or point) less. And the government-supported agencies that finance most mortgages impose additional fees, called loan level price adjustments, which make 30-year mortgages more expensive.

Fannie Mae and Freddie Mac charge price adjustments to borrowers who have lower credit scores or are putting down less money.

“Some of the loan level price adjustments that exist on a 30-year do not exist on a 15-year,” says James Morin, senior vice president of retail lending at Norcom Mortgage in Avon, Conn. Most people, according to Morin, roll those fees into their mortgage for a higher rate rather than paying them outright.

Imagine, then, a $300,000 loan, available at 4% for 30 years or at 3.25% for 15 years. The combined effect of the faster amortization and the lower interest rate means that borrowing the money for just 15 years would cost $79,441, compared to $215,609 over 30 years, or nearly two-thirds less.

The rub, of course, is the monthly payment. The price for saving so much money over the long run is a much higher monthly outlay: The payment on our hypothetical 15-year loan is $2,108, or nearly 50% more than the monthly payment for the 30-year loan ($1,432).

If You’re About to Retire

If you can afford the higher payment, it is in your interest to go with the shorter loan, especially if you are approaching retirement when you will be dependent on a fixed income.

For some experts, being able to afford the higher payment includes having a rainy day fund tucked away – according to Bob Walters, chief economist for Quicken Loans, your liquid savings should amount to at least a year’s worth of income. What financial planners like about the 15-year mortgage is that it is effectively “forced saving,” in the form of equity in an asset that normally appreciates. (Although like other equities, homes rise and fall in value.)

Weighing College and Retirement Savings Goals

There are some instances where a borrower may have incentives to save and invest that money elsewhere, as in a 529 account for college tuition or a 401(k) retirement account, where an employer matches the borrower’s contributions. And with mortgage rates so low, a borrower could, in theory, choose to borrow with a 30-year note, and invest the difference between that lower monthly payment and the higher amount he or she would have paid each month on the 15-year mortgage.

For example, in the previous example a 15-year loan monthly payment was $2,108 and the 30-year loan monthly payment was $1,432. A borrower could invest the $676 difference elsewhere.

The back-of-the-envelope calculation is how much (or whether) the return on the outside investment, less the capital gains tax you owe on it, exceeds the interest rate on the mortgage, after accounting for the mortgage interest deduction. (For someone in the 25% tax bracket, the deduction might reduce the effective mortgage interest rate from, say, 4% to 3%.)

This gambit, however, demands a propensity for risk, according to Shashin Shah, a certified financial planner in Dallas, because the borrower will have to invest in volatile stocks.

“Currently there’s no fixed-income investments that would yield a high enough return to make this work,” says Shah. It also requires the discipline to systematically invest the equivalent of those monthly differentials and the time to focus on the investments, which, says Shah, most people lack.

(For more on the special considerations of getting a mortgage at various life stages, see Getting A Mortgage In Your 20s and Getting A Mortgage In Your 50s .)

A Best-of-Both-Worlds Option?

Most borrowers evidently also lack – or at least think they lack – the wherewithal to make the higher payments required by a 15-year mortgage. But there is a simple solution for 30-year borrowers to capture much of the savings of the shorter mortgage: Simply make the larger payments of a 15-year schedule on your 30-year mortgage, assuming the mortgage has no prepayment penalty.

You are entitled to direct the extra payments to principal, and if you make the payments consistently, you will pay the mortgage off in 15 years. If times get tight, you can always fall back to the normal, lower payments of the 30-year schedule.

The Bottom Line

Many buyers would be well served if they opted for a 15-year fixed-rate mortgage instead of a 30-year mortgage. A lower interest rate and shorter term mean that you will pay considerably less for your loan.

And as Shah says: “There’s not a single client that we have who’s paid off their house that has ever felt bad about it.” The rub is the higher monthly payment, and it is sensible to weigh the value of a less costly mortgage against other savings priorities like college, retirement and a rainy-day fund.

(You may also be interested in reading 6 Tips To Get Approved For A Mortgage and Mortgages: How Much Can You Afford? )

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A type of tax credit available to students of a post-secondary educational institution, such as a college or university.

The technique of buying a fixed dollar amount of a particular investment on a regular schedule, regardless of the share price.

Extremely rapid or out of control inflation. There is no precise numerical definition to hyperinflation. Hyperinflation is.

Social finance typically refers to investments made in social enterprises including charitable organizations and some cooperatives.

Smart beta defines a set of investment strategies that emphasize the use of alternative index construction rules to traditional.

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Adjustable Rate vs Fixed Rate Mortgage Calculator #mortgage #rates #indiana


#what is an arm mortgage

#

ARM vs Fixed Rate Mortgage Calculator

Use this free tool to compare fixed rates side by side against amortizing and interest-only ARMs.

Understanding The Types of Mortgages Available

Fixed Rates

Fixed-rate mortgages are the most common way to finance a home in the United States. They allow home buyers to lock in a set APR and stable monthly payment for the duration of the loan.The most popular term is the 30-year mortgage, but the 15-year option is not uncommon.

The primary benefits of FRMs are

  • helps buyers build equity in their home;
  • stability in their monthly payments APR, while allowing customers to refinance if rates fall

The drawbacks of FRMs are

  • higher initial monthly payments;
  • higher initial APR – though they are lower than the maximum ARM cap rates can be refinanced if rates drop

Adjustable Rates

Do you know what they call an adjustable-rate mortgage in Europe?

That’s because homebuyers in most of the civilized world have only one option when financing a house, the ARM, often called a variable rate mortgage outside the United States.

In the US, we can choose between an ARM and a FRM, and because the latter offers the security of an unchanging APR with no surprises, it’s more popular.

However, there are hundreds of thousands of Americans who have benefited from taking out ARMs, so it just might be a good fit for your lifestyle and your future.

What is an ARM?

An ARM is a mortgage with an initial interest rate that lasts for a few years and then adjusts once a year after that. We’re not going to sugarcoat it for you – your interest rate (and monthly mortgage payment) will most likely go up after the ARM’s introductory period. By how much? That depends on the real estate market a few years from now, as well as the economy in general.

Fortunately for consumers, ARM rates come with a ceiling or cap, ensuring that your rate won’t spiral out of control at the end of the initial rate period. However, there are some exceptions to the rate cap guaranteed by an ARM agreement.

An ARM is more of a calculated risk than a gamble, but it can be very rewarding in the long run – or we should say – in the short run. This something we’ll have to explain later, though.

All ARMs are based on a 30-year loan term, and that’s one of the few constants in this type of home financing. The length of the initial rate, the interest rate afterward, and the value of your home are all subject to change.

The Most Common Reset Points

Let’s call the initial period during which time your introductory rate is preset the honeymoon period. The average one lasts about 5 years, but you can hammer out any deal you want, so long as the total loan period works out to exactly 30 years.

After the honeymoon period, your interest rate and monthly payment adjusts to the going rate. This is called the reset point, and it can play a big part in your ARM’s success.

For example, in what is commonly called a 7/1 ARM, your interest rate is preset for seven years, then adjusts once a year for the next 23 years, for a total of 30 years. Similarly:

  • In a 3/1 ARM, the APR is set for three years, then adjusts every year for the next 27 years.
  • In a 5/1 ARM, the APR is set for five years, then adjusts every year for the next 25 years.
  • In a 10/1 ARM, the APR is set for ten years, then adjusts every year for the next 20 years.

Which option to choose (if your lender offers you a choice) depends on how long you plan to live in the home and what you perceive your income will be in the near future.

ARMs vs. Fixed-Rate Mortgages

Some home buyers use an adjustable-rate mortgage to get a lower initial mortgage rate and aggressively pay down principal with extra payments, but many well intending people who try to do that find ways to spend the extra money each month and make the minimum monthly payments.

Based on average 2014 mortgages, Bankrate.com reports that mortgage rates were 4.5% for 30-year fixed-rate mortgages and 3.3% for the first five years of a 5/1 ARM. This amounts to monthly payments of $1,000 on a $200,000 mortgage with the 30-year fixed-rate (including principal and interest). Compare this to $875 a month for the honeymoon period of the 5/1 ARM.

The ARM initially saves you $125 a month, or it allows you to borrow more money. Which mortgage arrangement is best for you depends on many variables, and while you can try and search the web for the answer, some advertised rates differ from offered rates.

There’s only one way to test the waters. Sit down and talk to at least two different lenders. They will be happy to look at your situation and explain the process and your options.

PROS and CONS:

Who Are They Good For?

ARMs are good for people who are adventurous and optimistic. These people are either young or young at heart. After all, ARMs are definitely not for the faint-hearted.

If you’re happy-go-lucky and you can roll with the punches, an ARM can put you into a bigger house than a 30-year fixed-rate mortgage. It also helps if you foresee a windfall of money down the road a little, like a business venture that will pay off soon or a guaranteed promotion in the coming months.

Yes, the rates after your initial fixed period can be jaw-dropping, but hey, you’ve got the coolest house on the block, it’s near an unbelievably high-rated school, and it has a smart garage door opener.

Besides, if the interest rates happen to drop (like you’re gambling they will), you’re all set. You’re as snug as a bug in a rug, my friend. You can just look out your window and see your fixed-rate neighbors scrambling like madmen to refinance their mortgages.

Who Are They Bad For?

ARMs are bad for worrywarts. You can worry about the future of the economy as much as you want, but you can’t change it. If you like security and the ability to settle into a comfortable routine with no surprises, or if your idea of taking a major financial gamble with your money is changing the background design on your checks, an ARM is not recommended.

If you plan to live in your house for all or most of the 30-year period of a fixed-rate mortgage or if you’re on a fixed income, an ARM is to be avoided at all costs. As mentioned, the likelihood that your interest rate will go down after the initial fixed period is slim, so you would need to be comfortable with that eventuality.

Heed the advice of those who have come before you; think twice before you commit to an ARM simply for the fleeting thrill of being able to buy a nicer home. An ARM is a long-term commitment where you may be unsure of what you’re getting into.

While there are caps in place for your monthly payments and overall rate increases, there are usually no caps or limits to how much the first adjustment after the reset point will be. Watch out for that first step – it’s a killer!

Interest-Only Loans

Interest-only (IO) loans are typically ARMs where the borrower only pays the interest against the loan, but does not pay down on the principal unless they decide to pay extra. Some loans are structured to pay interest-only for the first 5 or 10 years then shift to amortizing loans where the borrower begins to pay down the principal.

The benefits risks of this loan format are similar to those of other ARMs, only more leveraged – since the borrower is not paying on principal. An (IO) loan allows one to:

  • buy a bigger house;
  • have a lower set payment allow larger payments when convienent to better manage lumpy cashflow;
  • invest the difference between a regular mortgage payment and the IO loan in other higher yielding options

The drawbacks of a IO loan are:

  • they typically come with higher interest rates;
  • since they don’t build equity (unless you pay extra) they don’t shield you from changes in either home prices or interest rates, making it far easier to go underwater on your loan

Pre-Qualified Vs #mortgage #calculation #formula


#prequalify mortgage

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Pre-Qualified Vs. Pre-Approved – What s The Difference?

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Ralph Waldo Emerson, American essayist and poet, once said that the future belongs to those who prepare for it. This is sage advice for homebuyers who need to lay the necessary groundwork to buy the home of their dreams.

Without good preparation, many buyers get lulled into the mistaken notion that if a lender pre-qualifies them for a mortgage this means that they have been pre-approved for a home loan. Unfortunately, there’s a world of difference between these two terms. If you’ve ever been confused by the two, we’ll bring you up to speed on how these terms differ – and why a misunderstanding can mean disaster for borrowers.

The Skinny on Pre-Qualified

Getting pre-qualified is the initial step in the mortgage process, and it’s generally fairly simple. You supply a bank or lender with your overall financial picture, including your debt, income and assets. After evaluating this information, a lender can give you an idea of the mortgage amount for which you qualify. Pre-qualification can be done over the phone or on the internet, and there is usually no cost involved. Loan pre-qualification does not include an analysis of your credit report or an in-depth look at your ability to purchase a home.

The initial pre-qualification step allows you to discuss any goals or needs you may have regarding your mortgage with your lender. At this point, a lender can explain your various mortgage options and recommend the type that might be best suited to your situation. (For more, see Mortgages: How Much Can You Afford? )

Because it’s a quick procedure – and based only on the information you provide to the lender – your pre-qualified amount is not a sure thing; it’s just the amount for which you might expect to be approved. For this reason, being a pre-qualified buyer doesn’t carry the same weight as being a pre-approved buyer who has been more thoroughly investigated. (To read more, see 4 Steps to Attaining A Mortgage .)

The Skinny on Pre-Approved

Getting pre-approved is the next step, and it tends to be much more involved. You’ll complete an official mortgage application (and usually pay an application fee), then supply the lender with the necessary documentation to perform an extensive check on your financial background and current credit rating. (Typically at this stage, you will not have found a house yet, so any reference to “property” on the application will be left blank). From this, the lender can tell you the specific mortgage amount for which you are approved. You’ll also have a better idea of the interest rate you will be charged on the loan and, in some cases, you might be able to lock in a specific rate.

With pre-approval, you will receive a conditional commitment in writing for an exact loan amount, allowing you to look for a home at or below that price level. Obviously, this puts you at an advantage when dealing with a potential seller. as he or she will know you’re one step closer to obtaining an actual mortgage.

The other advantage of completing both of these steps – pre-qualification and pre-approval – before you start to look for a home is that you’ll know in advance how much you can afford. This way, you don’t waste time with guessing or looking at properties that are beyond your means. Getting pre-approved for a mortgage also enables you to move quickly when you find the perfect place. When you make an offer, it won’t be contingent on obtaining financing, which can save you valuable time. In a competitive market, this lets the seller know that your offer is serious – and could prevent you from losing the home to another potential buyer who already has financing arranged.

Once you have found the right house for you, you’ll fill in the appropriate details and your pre-approval will become a complete application.

Getting Committed

The final step in the process is what’s called a “loan commitment ,” which is only issued by a bank when it has approved you, the borrower, and the house in question. This means the home should be appraised at or above the sales price. The bank may also require more information if the appraiser brings up anything he or she feels should be investigated (i.e. structural problems, accessibility issues, outstanding liens or litigation in progress). Your income and credit profile will be checked once again to ensure nothing has changed since the initial approval. (For more, see Understanding Your Mortgage .)

A loan commitment letter is issued only when the bank is certain it will lend, so the commitment date on your purchase contract should be closer to closing than to the date of your offer. (The seller can ask to see that letter as soon as the date has passed, so beware of anyone who tries to put an early commitment date into your contract).

The Bottom Line

Be warned. Pre-approved and pre-qualified are not the same thing. Don’t assume that the bank will provide your loan until you have the former. The mistake could cost you your new home!


FHA Loans vs #mortgage #rates #atlanta


#conventional mortgage

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FHA Loans vs. Conventional

FHA Loans vs. Conventional

In this article:

FHA Loans vs. Conventional Loans

It may not always seem clear whether to apply for a FHA loan or conventional loan. FHA loans have typically been known as loans for first-time homebuyers, filled with extra paperwork and complexity since it’s a government-insured program. But borrowers can use multiple FHA loans for purchasing or refinancing a home loan. However, FHA loans usually may not be used for second homes or investment properties, unless they have been approved by the Jurisdictional HOC.

As a borrower, the additional paperwork for FHA loans is minimal and probably undetectable. The appraiser does have an additional duty to point out any health and safety hazards that are present and require them to be fixed prior to closing. The difference in processing time required for FHA loans — as compared to conventional loans — is negligible.

The major advantage to selecting an FHA is that easier credit standards must be met to obtain financing. Typically, FHA requires a low down payment amount, lower credit scores are allowed, less elapsed time is needed for major credit problems (foreclosures and bankruptcies) and, if needed, you can use a non-occupant co-borrower (who is a relative) to help qualify for the loan using blended ratios. Blended ratios are debt-to-income ratios that equally blend the borrower’s and non-occupant co-borrower’s income and monthly payments to qualify for the loan. Except for HomeReady mortgages, conventional loans do not allow non-occupant co-borrowers.

See today s rates for FHA loans on Zillow

FHA loans also have some nice features that conventional do not. FHA loans are eligible for “streamline refinances ” — which is a cheaper and quicker way to refinance your loan in a low interest rate period. FHA loans are normally priced lower than comparable conventional loans.

Also FHA loans are assumable loans; this may be a particularly good future resale point if the borrower would have an existing low interest rate on the home they are selling. That interest rate and mortgage balance can be assumed by a new buyer. Conventional fixed rate loans do not offer this feature.

Conventional loans also have advantages in certain situations. If you make a 20 percent or more down payment for your home, you will not have to pay mortgage insurance to obtain your loan. An FHA loan -– no matter the amount of down payment — requires an upfront premium and also a monthly premium. Even if you put down less than 20 percent, the private mortgage insurance (PMI) charged to obtain the loan could potentially be a lot less than the FHA premiums and even less if your credit is good.

Private mortgage insurance is not only credit-sensitive, but it drops off much more quickly than FHA insurance at lower loan-to-value ratios. Conventional mortgage insurance will fall off automatically when the loan is paid down to 78 percent loan to value (LTV), whereas the FHA premiums will exist throughout the life of the loan if the down payment was less than 10 percent.

Conventional loans can also be used to purchase investment property and second homes. Conventional loans are also used to do jumbo loans — which are loans that exceed the statutory limits. Currently the maximum county limit in high-cost areas is $625,500.

The following examples will give you an idea of the differences in interest rates, monthly payments, mortgage insurance charges, and down payment requirements for different loan-to-value ratios and FICO scores.

FHA Loan Advantages

  • Low down payment required (3.5 percent minimum)
  • Can go as low as 500 credit score (620 minimum for conventional)
  • Not limited to 43 percent for debt-to-income ratio (qualified mortgage rule applies for conventional loans)
  • FHA loans are assumable
  • FHA loans are eligible for ”streamline” refinances
  • Shorter timeframe following major credit problems (3 years vs. 7 years for foreclosure and 2 years vs. 4 years for bankruptcy)
  • FHA loans typically will have a lower base interest rate than a comparable conventional loan
  • Non-occupant co-borrower (relative) may be used for qualifying by blending ratios

Need an FHA loan? Compare rates on Zillow

Conventional Loan Advantages

  • Low down payment required (3 percent minimum)
  • Mortgage insurance is required for loans exceeding 80 percent loan-to-value (Mortgage insurance is required on all FHA loans regardless of the loan-to-value)
  • Conventional mortgage insurance is only monthly or single premium (FHA is upfront and monthly premiums)
  • Conventional mortgage insurance will automatically end at 78 percent loan-to-value (FHA will stay for the entire life of the loan)
  • Conventional mortgage insurance is credit sensitive (For FHA, one premium fits all)
  • Conventional loans can cover much higher loan amounts (FHA over county limits)
  • Even though conventional loans may have higher interest rates, their monthly payments may still be lower

What are USDA Loans?


Pre-Qualified Vs #morgages


#prequalify mortgage

#

Pre-Qualified Vs. Pre-Approved – What s The Difference?

Loading the player.

Ralph Waldo Emerson, American essayist and poet, once said that the future belongs to those who prepare for it. This is sage advice for homebuyers who need to lay the necessary groundwork to buy the home of their dreams.

Without good preparation, many buyers get lulled into the mistaken notion that if a lender pre-qualifies them for a mortgage this means that they have been pre-approved for a home loan. Unfortunately, there’s a world of difference between these two terms. If you’ve ever been confused by the two, we’ll bring you up to speed on how these terms differ – and why a misunderstanding can mean disaster for borrowers.

The Skinny on Pre-Qualified

Getting pre-qualified is the initial step in the mortgage process, and it’s generally fairly simple. You supply a bank or lender with your overall financial picture, including your debt, income and assets. After evaluating this information, a lender can give you an idea of the mortgage amount for which you qualify. Pre-qualification can be done over the phone or on the internet, and there is usually no cost involved. Loan pre-qualification does not include an analysis of your credit report or an in-depth look at your ability to purchase a home.

The initial pre-qualification step allows you to discuss any goals or needs you may have regarding your mortgage with your lender. At this point, a lender can explain your various mortgage options and recommend the type that might be best suited to your situation. (For more, see Mortgages: How Much Can You Afford? )

Because it’s a quick procedure – and based only on the information you provide to the lender – your pre-qualified amount is not a sure thing; it’s just the amount for which you might expect to be approved. For this reason, being a pre-qualified buyer doesn’t carry the same weight as being a pre-approved buyer who has been more thoroughly investigated. (To read more, see 4 Steps to Attaining A Mortgage .)

The Skinny on Pre-Approved

Getting pre-approved is the next step, and it tends to be much more involved. You’ll complete an official mortgage application (and usually pay an application fee), then supply the lender with the necessary documentation to perform an extensive check on your financial background and current credit rating. (Typically at this stage, you will not have found a house yet, so any reference to “property” on the application will be left blank). From this, the lender can tell you the specific mortgage amount for which you are approved. You’ll also have a better idea of the interest rate you will be charged on the loan and, in some cases, you might be able to lock in a specific rate.

With pre-approval, you will receive a conditional commitment in writing for an exact loan amount, allowing you to look for a home at or below that price level. Obviously, this puts you at an advantage when dealing with a potential seller. as he or she will know you’re one step closer to obtaining an actual mortgage.

The other advantage of completing both of these steps – pre-qualification and pre-approval – before you start to look for a home is that you’ll know in advance how much you can afford. This way, you don’t waste time with guessing or looking at properties that are beyond your means. Getting pre-approved for a mortgage also enables you to move quickly when you find the perfect place. When you make an offer, it won’t be contingent on obtaining financing, which can save you valuable time. In a competitive market, this lets the seller know that your offer is serious – and could prevent you from losing the home to another potential buyer who already has financing arranged.

Once you have found the right house for you, you’ll fill in the appropriate details and your pre-approval will become a complete application.

Getting Committed

The final step in the process is what’s called a “loan commitment ,” which is only issued by a bank when it has approved you, the borrower, and the house in question. This means the home should be appraised at or above the sales price. The bank may also require more information if the appraiser brings up anything he or she feels should be investigated (i.e. structural problems, accessibility issues, outstanding liens or litigation in progress). Your income and credit profile will be checked once again to ensure nothing has changed since the initial approval. (For more, see Understanding Your Mortgage .)

A loan commitment letter is issued only when the bank is certain it will lend, so the commitment date on your purchase contract should be closer to closing than to the date of your offer. (The seller can ask to see that letter as soon as the date has passed, so beware of anyone who tries to put an early commitment date into your contract).

The Bottom Line

Be warned. Pre-approved and pre-qualified are not the same thing. Don’t assume that the bank will provide your loan until you have the former. The mistake could cost you your new home!


Adjustable Rate vs Fixed Rate Mortgage Calculator #mortgage #rate #comparison


#what is an arm mortgage

#

ARM vs Fixed Rate Mortgage Calculator

Use this free tool to compare fixed rates side by side against amortizing and interest-only ARMs.

Understanding The Types of Mortgages Available

Fixed Rates

Fixed-rate mortgages are the most common way to finance a home in the United States. They allow home buyers to lock in a set APR and stable monthly payment for the duration of the loan.The most popular term is the 30-year mortgage, but the 15-year option is not uncommon.

The primary benefits of FRMs are

  • helps buyers build equity in their home;
  • stability in their monthly payments APR, while allowing customers to refinance if rates fall

The drawbacks of FRMs are

  • higher initial monthly payments;
  • higher initial APR – though they are lower than the maximum ARM cap rates can be refinanced if rates drop

Adjustable Rates

Do you know what they call an adjustable-rate mortgage in Europe?

That’s because homebuyers in most of the civilized world have only one option when financing a house, the ARM, often called a variable rate mortgage outside the United States.

In the US, we can choose between an ARM and a FRM, and because the latter offers the security of an unchanging APR with no surprises, it’s more popular.

However, there are hundreds of thousands of Americans who have benefited from taking out ARMs, so it just might be a good fit for your lifestyle and your future.

What is an ARM?

An ARM is a mortgage with an initial interest rate that lasts for a few years and then adjusts once a year after that. We’re not going to sugarcoat it for you – your interest rate (and monthly mortgage payment) will most likely go up after the ARM’s introductory period. By how much? That depends on the real estate market a few years from now, as well as the economy in general.

Fortunately for consumers, ARM rates come with a ceiling or cap, ensuring that your rate won’t spiral out of control at the end of the initial rate period. However, there are some exceptions to the rate cap guaranteed by an ARM agreement.

An ARM is more of a calculated risk than a gamble, but it can be very rewarding in the long run – or we should say – in the short run. This something we’ll have to explain later, though.

All ARMs are based on a 30-year loan term, and that’s one of the few constants in this type of home financing. The length of the initial rate, the interest rate afterward, and the value of your home are all subject to change.

The Most Common Reset Points

Let’s call the initial period during which time your introductory rate is preset the honeymoon period. The average one lasts about 5 years, but you can hammer out any deal you want, so long as the total loan period works out to exactly 30 years.

After the honeymoon period, your interest rate and monthly payment adjusts to the going rate. This is called the reset point, and it can play a big part in your ARM’s success.

For example, in what is commonly called a 7/1 ARM, your interest rate is preset for seven years, then adjusts once a year for the next 23 years, for a total of 30 years. Similarly:

  • In a 3/1 ARM, the APR is set for three years, then adjusts every year for the next 27 years.
  • In a 5/1 ARM, the APR is set for five years, then adjusts every year for the next 25 years.
  • In a 10/1 ARM, the APR is set for ten years, then adjusts every year for the next 20 years.

Which option to choose (if your lender offers you a choice) depends on how long you plan to live in the home and what you perceive your income will be in the near future.

ARMs vs. Fixed-Rate Mortgages

Some home buyers use an adjustable-rate mortgage to get a lower initial mortgage rate and aggressively pay down principal with extra payments, but many well intending people who try to do that find ways to spend the extra money each month and make the minimum monthly payments.

Based on average 2014 mortgages, Bankrate.com reports that mortgage rates were 4.5% for 30-year fixed-rate mortgages and 3.3% for the first five years of a 5/1 ARM. This amounts to monthly payments of $1,000 on a $200,000 mortgage with the 30-year fixed-rate (including principal and interest). Compare this to $875 a month for the honeymoon period of the 5/1 ARM.

The ARM initially saves you $125 a month, or it allows you to borrow more money. Which mortgage arrangement is best for you depends on many variables, and while you can try and search the web for the answer, some advertised rates differ from offered rates.

There’s only one way to test the waters. Sit down and talk to at least two different lenders. They will be happy to look at your situation and explain the process and your options.

PROS and CONS:

Who Are They Good For?

ARMs are good for people who are adventurous and optimistic. These people are either young or young at heart. After all, ARMs are definitely not for the faint-hearted.

If you’re happy-go-lucky and you can roll with the punches, an ARM can put you into a bigger house than a 30-year fixed-rate mortgage. It also helps if you foresee a windfall of money down the road a little, like a business venture that will pay off soon or a guaranteed promotion in the coming months.

Yes, the rates after your initial fixed period can be jaw-dropping, but hey, you’ve got the coolest house on the block, it’s near an unbelievably high-rated school, and it has a smart garage door opener.

Besides, if the interest rates happen to drop (like you’re gambling they will), you’re all set. You’re as snug as a bug in a rug, my friend. You can just look out your window and see your fixed-rate neighbors scrambling like madmen to refinance their mortgages.

Who Are They Bad For?

ARMs are bad for worrywarts. You can worry about the future of the economy as much as you want, but you can’t change it. If you like security and the ability to settle into a comfortable routine with no surprises, or if your idea of taking a major financial gamble with your money is changing the background design on your checks, an ARM is not recommended.

If you plan to live in your house for all or most of the 30-year period of a fixed-rate mortgage or if you’re on a fixed income, an ARM is to be avoided at all costs. As mentioned, the likelihood that your interest rate will go down after the initial fixed period is slim, so you would need to be comfortable with that eventuality.

Heed the advice of those who have come before you; think twice before you commit to an ARM simply for the fleeting thrill of being able to buy a nicer home. An ARM is a long-term commitment where you may be unsure of what you’re getting into.

While there are caps in place for your monthly payments and overall rate increases, there are usually no caps or limits to how much the first adjustment after the reset point will be. Watch out for that first step – it’s a killer!

Interest-Only Loans

Interest-only (IO) loans are typically ARMs where the borrower only pays the interest against the loan, but does not pay down on the principal unless they decide to pay extra. Some loans are structured to pay interest-only for the first 5 or 10 years then shift to amortizing loans where the borrower begins to pay down the principal.

The benefits risks of this loan format are similar to those of other ARMs, only more leveraged – since the borrower is not paying on principal. An (IO) loan allows one to:

  • buy a bigger house;
  • have a lower set payment allow larger payments when convienent to better manage lumpy cashflow;
  • invest the difference between a regular mortgage payment and the IO loan in other higher yielding options

The drawbacks of a IO loan are:

  • they typically come with higher interest rates;
  • since they don’t build equity (unless you pay extra) they don’t shield you from changes in either home prices or interest rates, making it far easier to go underwater on your loan

Professional Liability Insurance, Travelers Insurance, professional liability insurance vs malpractice insurance.#Professional #liability #insurance #vs #malpractice


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Professional liability insurance vs malpractice insurance

Travelers Knows Management

Professional liability insurance vs malpractice insurance

Travelers Knows Management

Management & Professional Liability

Professional liability insurance vs malpractice insurance

Businesses face risks every day. Risk requires protection. Without it, you could lose everything: your clients, your reputation, your company – even your personal assets. Losses and lawsuits can come from any direction. That is why you need a trusted advisor with the vision to help you anticipate challenges and assist in keeping you and your organization protected with a suite of products and services. Travelers can help protect any size business through of full range of customized management and professional liability insurance coverages.

Travelers Knows Management & Professional Liability

With dedicated policies for private companies, public companies, nonprofit organizations, financial institutions and professional services, as well as managed care organizations, healthcare organizations and community homeowners associations, you’ll get the coverage that fits your unique business, responsibilities, and exposures. Choose either standalone coverage or a suite of coverages on a single policy. Travelers has the flexibility to adapt to you and your business.

Travelers Management & Professional Liability offerings include a variety of products for your business.


Solving wget – ERROR: cannot verify site certificate #rapidssl #vs #geotrust


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Solving wget ERROR: cannot verify site certificate. Unable to locally verify the issuer’s authority.

My Problem

When using wget on a SSL/TLS secured URL, I got the following error:

In my case I was attempting to wget an HTTPS URL that was secured with a certificate from a trusted authority and yet I still got the above error.

My Solution

Yes, you could take wget s advice and use the –no-check-certificate option for wget, but that would be bad. Don t get accustomed to avoiding errors by suppressing them.

You need to use openssl s_client to discover the certificate s chain, thusly:

Once you ve figured out what the certificate chain looks like, then check your main certificate file, probably named cert.pem (finding that is an exercise left for the reader). Check to see if the certificates required by the site you re trying to wget is in your certificate file. If not, you ll need to acquire them and either append them to your main certificate file, or create a separate file and point to it with your wget command using the –ca-certificate option.

The Long Story

Imagine my surprise when I was trying to automate a simple process using wget, and I was stymied by the error:

The site was protected by a GeoTrust RapidSSL certificate. According to the wget man page, by default (at least in wget 1.12 which is what I was using at the time of this post) wget looks for CA certificates at the system-specified locations, chosen at OpenSSL installation time. To find out where that location is, you ll want to read How to Determine OpenSSL s Default Directory OPENSSLDIR.

After running I ran openssl s_client -connect whateversite.com:443 -debug and saw the errors listed above, I grep d through my cert.pem file for any mention of the word rapid. No results were found, of course. I cursed cheap certificates and started searching for the RapidSSL certificate bundle. I finally found it here .

If the endpoint in question is using a self-signed certificate, then you re going to have to just grab the certificate and copy / paste the presented certificate from —–BEGIN TRUSTED CERTIFICATE—– to —–END TRUSTED CERTIFICATE—–. Just don t get into the habit of accepting self-signed certificates which no one does. Certainly not me. _

Once it was downloaded, I had some options. I could append them to the main cert.pem file for the server in question. I wasn t comfortable with changing the entire server s behavior. There was no need to accept every and all RapidSSL cert across the whole server.

Instead, I chose to use the –ca-certificate=file option of wget. In the words of wget s man page:

Use file as the file with the bundle of certificate authorities (“CA”) to verify the peers. The certificates must be in PEM format. Without this option Wget looks for CA certificates at the system-specified locations, chosen at OpenSSL installation time.

That way I can run wget in my script, not be in the bad habit of suppressing warnings, and not make universal changes to the server. And all was happy in the land. Until the secure login page wouldn t work with wget s post option, which is a different blog post.

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20-Year vs #current #mortgage #loan #rates


#20 year mortgage

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20-Year vs. 30-Year Mortgages

It’s time for the first mortgage match-up of 2012.

And because paying down the mortgage early seems to be so en vogue these days, let’s take a look at “20-year mortgages vs. 30-year mortgages.”

The most common type of mortgage is the 30-year fixed. It amortizes over 30-years, and the mortgage rate never changes during that time.

Each mortgage payment is the same every month, so there isn’t any fear of interest rates resetting higher and pushing a homeowner towards foreclosure .

This relative simplicity and safety explains their popularity, but they aren’t the end all, be all solution for every homeowner out there.

30-Year Mortgages Have Drawbacks

When it comes down it, 30-year mortgages have some drawbacks, with the most obvious one being the long amortization period. They also come with the highest interest rates relative to other loan programs.

And since the mortgage takes so very long to be paid off, more interest is paid. Think of it this way. If you borrowed money from a friend and asked to pay it back over 30 years, they would probably say no.

If by chance they agreed, they’d want to charge you a higher rate of interest. And because you’d be paying it back so slowly, you’d pay a lot more interest over that time.

Assuming your loan amount is large, it could be the difference of many thousands of dollars.

Look to a Shorter-Term Mortgage

So what are homeowners to do? Well, the most common solution to this ”problem” is to look at a shorter-term mortgage.

And while the 15-year fixed is the most common alternative, it comes with its own drawback, namely a much higher monthly mortgage payment .

In other words, not every homeowner can just say, I want to pay my mortgage off faster and switch to a 15-year fixed.

Fortunately, there are options in between, with the most common being the 20-year fixed mortgage.

A 20-year mortgage sheds 10 years off the typical loan term. and results in much less interest paid throughout its duration.

Let’s look at an example to illustrate the savings:

Loan amount: $200,000

As you can see, the interest rates aren’t much different, though the 20-year mortgage does price a little bit lower than the 30-year fixed.

Still, the homeowner with the 30-year mortgage pays more than $200 less each month.

But the 20-year mortgage results in interest savings of nearly $60,000! This borrower would also own their home free and clear an entire decade earlier.

This can be pretty beneficial, especially if you plan to retire soon and anticipate being on a fixed income.

The 20-year fixed is also a good alternative because you won’t break the bank making your mortgage payment each month.

But again, the payment will be higher than the 30-year payment, which could stretch you thin or limit what you can afford if you’re buying a home.

Go With a 20-Year Fixed Mortgage to Stay on Course

If you’re currently in a 30-year fixed, and don’t want to reset the mortgage clock, you can refinance to a 20-year fixed to stay on course without even paying more each month.

Because mortgage rates are so low at the moment, you may be able to refinance from a 30-year to a 20-year fixed mortgage and even lower your monthly payment.

Also keep in mind that there are other alternatives outside the 15, 20, and 30-year options.

And some banks even allow you to choose your own mortgage term. whether it’s a 17-year fixed or a 24-year fixed.

So be sure to look at all available options to see which makes the most sense financially for your unique situation.

Also ask yourself why you want to pay the mortgage off early. There may be a better place for your money.


Master of Finance Versus MBA #mba #vs #masters #in #finance, #master #of #finance #versus #mba


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Master of Finance Versus MBA

Many people who want to proceed to graduate studies related to business contemplate whether to get a Master of Finance Versus MBA degree. Choosing which of these programs best suits them can be challenging because both programs offer intensive study and high-paying career opportunities in the future. Both degrees can prepare students to handle positions at the administrative level in business and finance industries.

The major difference between these programs is that the MBA equips students with broader skills and knowledge in business and helps graduates apply them in many different areas. On the other hand, Master of Finance programs are more finance-specific. The individual’s career goals should determine which program to choose.

Details About Master of Finance Versus MBA Degree Programs

A Master of Finance Degree only takes a year to finish. Applicants have to complete an internship program and meet a few other basic requirements in order to qualify. Conversely, MBA applicants should have at least three years of work experience in a related field. They also have to complete an undergraduate degree from an accredited school. This is why most Master of Finance students are younger than MBA students. Individuals have to spend more for tuition cost when they opt for MBA programs. The Master of Finance is more appealing to students who want to jump start their careers in a relatively short period of time.

MBA programs offer courses like economics, accounting, statistics, organizational processes and communications. Meanwhile, the Master of Finance puts emphasis on accounting and management. Top ranking schools that offer MBA programs are Harvard University and Stanford University. Recently, more universities have begun to offer Master of Finance programs. In fact, MIT has already sent some of their graduates to major companies like Bank of America and J.P. Morgan Chase. Ohio State University also offers a great Master of Finance program.

Master of Finance versus MBA Career Options and Job Placement

Master of Finance versus MBA issues have created confusion among individuals who want to pursue either of these graduate programs. Master of Finance students prepare for careers in trading and principal investments by taking courses like capital markets, economics, investment management and financial strategy. Meanwhile, the broad coverage in MBA programs prepares students to work in different fields and hold positions as financial managers and controllers. Those who want an MBA career may work in commercial banks and deal with things like trusts, mortgages, lending and investments. MBAs can also assume responsibilities like managing large financial institutions and administering individual branch office functions. Governments and non-profits also hire graduates from best MBA degrees to help them run the organization effectively.

Meanwhile, large companies have also realized the need to have graduates with the best Master of Finance degrees. This is especially true for firms that solely offer finance-related products and services. Finance careers can be a bit limited, but MBAs have much more flexibility. Generally, Master of Finance graduates earn lower salaries than MBAs. In most cases, MBAs serve as formal or informal coaches for new Master of Finance graduates. This is mainly due to their many years of experience, broad knowledge and skills, and the length of time they spent to complete the degree. With the increasing number of people entering these programs, the competition is getting tougher. Graduates from both programs often seek jobs at financial firms. Since both the Master of Finance and the MBA are excellent choices for furthering one s education, choosing a Master of Finance versus MBA should depend on the student’s capacity and career goals.

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