To qualify for a VA loan there are several criteria you must meet. The very first step you have to take is to get a Certificate of Eligibility from the VA. In order to be eligible you have to meet one of the following:

Have an honorable discharge during WWII or later
•    Active-duty veterans discharged during WWII or later, without the status of “dishonorable”
•    Active-duty veterans with at least 90 consecutive days of service during major conflict
•    Peacetime veterans and active duty personnel with at least 180 days of consecutive service
•    Enlisted veterans whose service began after 1980 or officers whose service began after 1981 and who have served at least 2 years.

Additionally, members of the National Guard and Selected Reserve may qualify under certain circumstances. If you do qualify for a VA loan you can purchase most types of living quarters, but you cannot purchase a rental property. The home needs to be for your private use.

There are quite a few benefits to VA loans. They allow you to avoid a down payment depending on the lender. They also tend to have lower interest rates and have no insurance premiums because the government is guaranteeing the loan. Closing costs can be less expensive and often there is no penalty for prepaying your mortgage. Finally, VA assistance is available for people that qualify due to temporary financial difficulty. To find out more about VA loans visit http://www.valoans.com/.

Being self-employed can make the process of getting a home mortgage more difficult, especially if you haven’t had this type of employment for very long. Income is one of the major factors lending institutions take into account when approving or denying a mortgage application, and it is more difficult to verify the earnings of self-employed people.

When you’re self-employed, there are usually fewer documents which provide evidence of your earning level, and it is likely to come from a greater number of sources. Your income might also be considered “less reliable” by banks, although it is true that almost anyone can lose their job unexpectedly. It can also be pointed out that most self-employed people are not dependent upon a single employer for their income; it is more likely that the income will temporarily decrease, but it has a much lower chance of being completed cut off.

You will have to do as best as possible to prove how much you earn to the bank or credit union. The Federal Reserve web site recommends getting two to three years’ worth of tax returns, balance sheets, and additional business information to bring when you first visit the lending institution to fill out an application. Be sure to thoroughly report your income when paying taxes in the years prior to applying for a mortgage.

Having a good credit record will help compensate for a less verifiable income level. If you are relatively young, haven’t needed an auto loan, and/or have never used credit cards, it is possible that you have little or no credit history. Offering to make a larger down payment and getting any false data removed from your credit record will help counteract the bank’s concerns regarding income.

A type of mortgage which is more accessible for some types of self-employed people is the “Stated Income” or “Alternative Stated Income” mortgage, which removes the need to thoroughly document your level of self-employed income. According to freddiemac.com, getting a mortgage of this type is faster but typically requires a substantial down payment and a favorable credit score.

Applying the above-mentioned tips should help you achieve greater success in getting a mortgage when you’re self-employed. Basically, it is best to use all available methods to assure the lending institution that your income will not decrease, make an effort to mitigate the perceived risk posed to them, and prove that you have paid bills on time in the past.

Prime and subprime mortgages are built upon the same basic principle: providing a large loan with a home or other real estate property as its collateral. However, there are some significant differences between subprime (a.k.a. nonprime) and prime loans, which have had a major impact on home owners as well as lenders. Here are some of the factors in which prime and subprime mortgages have differences…

INTEREST: Nonprime loans have a higher interest rate than prime loans. In theory, this is supposed to compensate lenders for the greater chance of foreclosure and/or late payments. According to bankrate.com, there is usually a greater difference between the subprime interest rates offered by different banks than there are with prime rates.

PENALTY: Prime loans are much less likely to have a prepayment penalty than their subprime counterparts. Senate.gov indicates that Senator Dodd recently referred to the fact that about seventy percent of subprime mortgages need a penalty to be paid for making early payments. Another one of their differences is that they also more frequently require a large “balloon payment.”

APPROVAL: It is more difficult for home buyers to get approved for prime mortgages, especially if they have minimal income and/or a mediocre credit history. Borrowers with problematic credit records more frequently accept mortgages with terms that are not favorable to them, because they aren’t able to qualify for prime loans.

DECEPTION: A subprime mortgage lender is more likely to charge unreasonable fees or try to deceive borrowers into paying more interest than they need to, although this is not true for all nonprime lenders. According to NPR.org, approximately one out of ten home owners with subprime loans can actually qualify for prime mortgages.

RATES: Subprime mortgages are more frequently adjustable rate (ARM) than fixed; the Federal Reserve web site states that over 2/3rds of such loans are adjustable. This increases the possibility that borrowers will be incapable of paying the differences if interest rates undergo an unexpected increase.

Overall, subprime mortgages are considered less borrower-friendly and based upon the theory of charging home owners more to compensate for the risk suggested by their problematic credit records. On the other hand, prime mortgages are less costly to borrowers and put banks at a lower risk of non-payment. Many of these differences relate to how they are marketed and supplied; the main differences with regard to the loan itself are prepayment penalties, interest rates, and their adjustability.

If you have equity build up in your home and need extra money for some reason then a home equity loan or line of credit may be the right solution for you. The line of credit is similar to a mortgage in that it is taken out against either the equity in your home or the home itself. Then the line of credit is available to you to use how you need. You will only pay interest on the portion of money that you use.

Generally, you are given a specific period of time where you can withdraw the money and there is often a minimum amount you can withdraw. Then you’ll begin the repayment period with also has a minimum amount.

Interest rates on a home equity loan are fixed for a short amount of time and then goes to an adjustable rate. The rate is adjusted according to the market, which means it can become pretty high if the market is bad.

There is also an annual fee associated with most home equity loans as well as other normal mortgage fees. You should watch out for an additional fee known as a margin that is added to your payment each month in some circumstances.

A home equity loan has the potential to be a great help for home improvement projects and the like, but be careful that you don’t use more money than your home is worth. This can create negative equity in your house and take a long to recover from. And as with any loan be sure to shop around for the best rates you can get.

Mortgage loans involve a number of terms which you need to know and understand before applying for one. Such words and phrases include “closing costs”, “pre-payment penalty”, “non-conforming”, and “points.” Keep reading to learn more about these mortgage terms and others you should know…

Points: This refers to pre-paid interest payments which might have to be made at the beginning of a mortgage. Points increase the initial cost, but they reduce the amount of interest paid during the repayment period.

Pre-Payment Penalty: Some mortgages require borrowers to pay a penalty if they want to pay off part or all of the balance before it is due. Borrowers who intend to sell their homes relatively soon should make sure this penalty is not included in the mortgage’s terms.

Term: This refers to how long it takes to repay the mortgage without making extra payments; many fixed-rate mortgages have terms of fifteen or thirty years. Longer terms bring about smaller monthly payments, but a greater overall cost.

Interest Rate: Lenders primarily generate income by charging interest on mortgages and other types of loans. The higher the interest rate, the larger monthly mortgage payments will be. A mortgage may have a fixed interest rate, or it might be adjustable.

Closing Costs: When a home or other property is sold, both the buyer and seller must pay a number of different expenses called “closing costs.” Some costs go to the lending institution, while others are paid to realtors, the local government, insurance companies, etc.

Subprime: These are a type of mortgage which is usually offered to home buyers with poor credit records and has a higher interest rate than other mortgages. Subprime mortgage loans have become harder to obtain because of the high foreclosure rate produced by them.

Down Payment: With some exceptions, home or business buyers are required to provide a large initial payment which covers part of the property’s selling price. This is called a down payment, and is not part of the mortgage principal.

Non-Conforming: Also referred to as “jumbo”, these mortgages exceed a certain “conforming” borrowing limit (this varies depending upon the state and the number of units in the home; you may want to know this amount and take it into consideration when purchasing an expensive home) and require a higher interest rate to be paid.

Reverse: This is a kind of mortgage which is only available to senior homeowners; it enables them to receive payments in exchange for slowly depleting their home equity. This makes it more difficult for someone to inherit and live in the home, but it lets the current owner continue living there despite a reduced income.

It may seem attractive to raid your 401k retirement plan to pay your home mortgage, especially if you are having difficulty making payments, but this usually isn’t the best choice. Read on to learn about a few of the reasons why you shouldn’t raid your 401k for mortgage payments…

1. Usually, a significant amount of taxes are paid on the amount of money withdrawn from a 401k plan. According to irs.gov, a ten percent penalty tax must be collected if you raid the 401k funds and your age is less than fifty-nine years and six months. There are some exceptions to this rule, especially if you are at least fifty-five years old.

2. Raiding the 401k to pay your mortgage will easily improve your financial situation in the short-term, but becomes harmful in the future. Your retirement income might be significantly diminished, and working for a greater number of years could become necessary. It is worth considering other methods of raising the needed money, like selling an automobile or temporarily working more hours. Using more difficult methods such as these will make the situation harder now, but you are likely to feel it was a good decision upon reaching retirement age.

3. Unless it is your intention to entirely pay off the mortgage using the 401k, it is only a temporary fix for the problem of not being able to afford the monthly payments. If you remain in the same home and monthly income does not increase greatly, this problem may reoccur unless long-term financial changes are made (including measures aimed at coping with unexpected expenses more effectively).

4. You may not be able to depend upon social security to provide sufficient retirement income, especially if you are relatively young or have been unemployed for long periods of time. A white paper issued by the White House Council of Economic Advisors in 2005 stated that social security will eventually not have enough income to pay for the benefits it normally supplies, probably in the year 2042. It warns that these benefits will have to be significantly reduced.

Overall, although there are some situations where it may be the only realistic option to raid your 401k, this is a decision which can have serious consequences. Before deciding to raid your 401k retirement plan to pay the mortgage, make sure you have thoroughly considered all alternatives which are available to you, and fully understand its impact.

Private Mortgage Insurance, called PMI, is a type of insurance a borrower has to get if their down payment on a home is less than 20% of the home’s cost. PMI allows a borrower to get a lower interest rate mortgage because it helps protect a lender against loan default.

Most borrowers will need to get PMI because 20% of a home’s cost represents a large amount of money usually. To help you understand the size of this, 20% of $100,000 is $20,000. That’s quite a bit.

The charges associated with PMI vary depending on things like the size of your down payment as well as the size of the loan. However, the Mortgage Bankers Association of America reports the average amount is about ½% to 1% of the loan annually. This means if you have a $90,000 loan your annual PMI would be $450. The annual amount is divided into monthly payments and isn’t tax deductible.

PMI does have its benefits though. It protects lenders against a loss in case of a loan default, allowing borrowers with less cash to afford more home. Borrowers can not only buy a more expensive home, they can buy a home more quickly because they don’t have to wait years to save up for a larger down payment. Additionally, once the amount you still owe on your home loan reaches 20% you can discontinue your PMI and just pay your regular mortgage charges.

A number of fixed-rate mortgage options exist in addition to typical fifteen or thirty year mortgages of this type. Such mortgage options can be preferable in some situations, depending upon your income level and the type of property you intend to purchase. Read on to learn more about a few of these options…

Pick-A-Payment: Although this type of mortgage is more common in adjustable-rate form (often called an “Option ARM”), fixed-rate mortgages of this type are available to home buyers as well. Wachovia offers a fixed-rate Pick-A-Payment mortgage option; according to their web site, it allows home owners to make either an interest and principal, minimum (actually increases the loan’s balance), 15-year, or interest-only payment each month. This can be useful for home owners who have a level of available funds which varies significantly from one month to the next, such as contractors who do most of their work during a few specific months of the year.

Interest-Only: A fixed rate interest-only mortgage lets the home owner make a predictable, relatively low monthly payment until its term has expired. However, none of the principal is paid off during this period of time, and (unlike with renting) property taxes still have to be paid. According to wikipedia.org, such mortgages tend to have an interest rate which is “slightly higher.” Interest-only mortgage options can be desirable for those who plan to sell their homes relatively soon or have a low income which they expect to significantly increase.

Balloon: Another one of the mortgage options available with a fixed-rate, balloon mortgages require a large payment to be made when their term expires. Wells Fargo has a “40/30″ fixed-rate balloon mortgage option; their web site indicates that payments are made over a forty-year period, but a “substantial” balloon payment (it states that this can be as high as half of the initial balance) is required after thirty years have elapsed. This type of mortgage is more likely to be the best choice for home owners who can afford to make extra payments or do not plan to continue living in the same home indefinitely.

In general, all three of the above-mentioned fixed rate mortgage options provide greater payment flexibility, but increase the overall length of the repayment time period. For the most part, these options are preferable for people who realistically expect their monthly earnings to become substantially higher over the next five to ten years.

There are many reasons why you may be having trouble paying your mortgage, from a loss of your job to illness to a reset in an adjustable-rate mortgage. Whatever the reason, there are ways to avoid foreclosure in this situation. Here are a few tips to help you out if you find yourself in a possible foreclosure situation.

The first thing to do is contact your lender. It is cheaper for your lender to work something out with you than to foreclose on your house and they have options available for this situation. These options include:
•    Forbearance, which is a temporary agreement that lets you pay less on your mortgage for a certain period of time,
•    Reinstatement, which allows you to pay the total amount you are behind by a set date,
•    A repayment plan, that allows you to combine the amount you’re past due with your regular payments to catch up, or
•    A loan modification, which permanently changes your original terms to make your payments more affordable.

Also, be aware of predatory lending schemes at this time. They will often try to use your panic to get you into high-cost mortgages. Be wary of anyone that offers you “bargain loans” and offers that are good for only a short time.

If you are still unable to make your mortgage payments try other steps such as talking to a housing counseling agent or a government agency to see if you qualify for help.

The current mortgage crisis has had negative consequences for many people in the United States, including homeowners with subprime loans, employees of lending institutions, investors, contractors, people trying to sell their homes, and others. Here are some tips on avoiding being harmed by the mortgage crisis…

1. Avoid buying a home unless you plan to (and can afford to) live there for many years. It has become much harder to sell homes in many areas, partially because of greater difficultly buyers face in obtaining a mortgage. Sellers also have to compete with greater availability of homes which have been foreclosed upon.

2. Beware of scams targeted against people who have lost their jobs, potential home buyers, or property owners at risk of foreclosure. As with any financial or economic crisis, there are dishonest individuals trying to take advantage of the situation. If you are concerned that someone may be promoting a scam, conduct some research online about what they are offering.

3. Do not enter into any mortgage which will eventually become impossible to repay without selling the property, especially in regions where home sales have most significantly reduced. Other economic factors, such as the rising unemployment, may additionally decrease home sales.

4. If you are employed in the mortgage or real estate industry, saving extra money and avoiding unnecessary major purchases may prove beneficial. If you lose your job, the process of finding different employment is less stressful and financially harmful if you have extra money saved. Avoid investing your money in ways which penalize early withdrawal, such as certificates of deposit.

5. If you plan to purchase a home eventually, avoiding anything which will harm your credit record is important. Banks and other mortgage lenders are applying greater scrutiny to potential borrowers, due to the crisis involving subprime loans. If a late payment must be made, try to prioritize paying the businesses which are more likely to harm your credit record, and work toward eliminating any debt to them.

6. Avoiding investments which are completely or partially dependent upon the mortgage or real estate industries may reduce the risks you face. Keep in mind that increased foreclosures, unemployment, and poor home sales can decrease both consumer and business spending in a variety of fields.

Keeping the above-mentioned tips in mind and realistically planning your financial future should be helpful in avoiding negative impacts of the current mortgage crisis and its indirect effects on the economy.