Don’t assume that because you can speak the lingo of mortgage fluently you can also speak to jingoistic lenders with equal fluency. Here, we explain basic loan lingo related to home loans that cut across all income brackets. Read through the various mortgage loan options and see what they are all about.

Government or conventional loans: The United States is a large player in the residential mortgage market. About 20 percent of home loans are either guaranteed or insured by an agency of the federal government. These mortgages are also called government loans. The remaining 80 percent of residential mortgages are referred to as conventional loans. These loans are mortgage loans usually provided by lenders who are not government-sponsored such as the FHA, VA or RHS.

Federal Housing Administration (FHA): Set up in 1934 during the Great Depression to encourage the U.S. housing industry, this body encourages people of low-to-moderate income to get mortgages by giving federal insurance against losses to those lenders who make FHA loans. The FHA, however is not a money lender. In fact, borrowers must look for an FHA-approved lender such as a bank or financial institution that will give them a mortgage which the FHA will then insure.

Department of Veterans Affairs (VA): This provision enables people on active duty and veterans to buy homes. The VA does not have money of its own but acts as a lender that guarantees mortgages and loans granted by lending institutions. In fact, VA loans are usually sponsored by the U.S. Department of Veteran Affairs. They offer competitive interest rates, little or no down payments and very little declaration of income.

Farmers Home Administration (FHA): Like the above two bodies, this one too is not a direct lender. Contrary to its name, one doesn’t have to be a farmer to obtain a loan from this institution. But you do need to buy a home in the countryside for which the FHA insures mortgages. These loans come with minimal down payment and are easier to obtain than others. These loans are FHA loans are overseen by the Federal Housing Administration.

These loans come from lenders with attractive features such as minimal cash down payments, long loan terms, penalty-free if you repay before time, and lower interest rates. But these loans are targeted towards specific kinds of home buyers, have comparatively low maximum mortgage amounts, but take very long to obtain approval.

Apart from these three basic loan types, you can also choose from:

Fixed rate loans: Easy to qualify for, lenders to this mortgage offer you this loan which comes in 20 and 30 year schemes and gives you a good chance to keep your mortgage payments easy on the pocket over a long duration. If you plan to live in your home for several years and keep your expenses at a minimum, this loan is for you.

Adjustable rate loans (ARMs): Though this loan scheme has a low adjustable rate, it is not unusual for lenders to give you a maximum period of 10 years for repayment. The rule is that the low start rate means a short time before you start paying the first mortgage installment.

Combination (hybrid) loans: These loans combine a fixed rate with ARM loans. They have a built-in delayed adjustment period of which the initial period is fixed. They carry very little risk—usually lesser than one year and come with an interest rate that’s lesser than fixed-rate loans. Though they begin as fixed rates loans, they adjust to ARM after a few years. This is meant for people on the move as lenders of a combination loan allow buyers to make use of low interest rates for repayment in the initial years of the mortgage scheme.

Balloon mortgages and pledge asset loans: Here, your monthly mortgage installments are based on a fixed term up to 30 or 15 years amortization. At the end of this balloon period, your lender will tell you that the remaining mortgage loan amount is due for payment. Pledged asset mortgages are loans meant for those with sufficient income to pledge their investments as collateral in place of a cash down payment.

When you are sending your child to college, there are several different things to be looked into. One of the first considerations will be finding the right school for your child to attend. Beyond this are also financial considerations for a student. The financial aspect of college will often times cause a child to rely on parents to help with funding options that are available. Because of this, there are several programs and funding options to send your kid to school in which you and the child can benefit from the investment.

One way to help with finances for sending your child to college is through a savings that you start early on. This can have many benefits to it later on. One of these is the Education IRA or the Coverdell Education Savings Accounts. By saving in this account, you will be able to have tax free costs, as long as the money is used for your child’s education. There is a limit to putting $2,000 in this account per year. Not only will this count towards your taxes, but it will also help with credit and investment reports if needed. Another is the Roth IRA Account. You can put up to $4,000 in the account every year, allowing accumulation potential. This is similar to the Coverdell Education Savings Account, but allows more flexibility in the amount of money you can save.

Another way to help is by becoming involved in the 529 Qualified Tuition Savings Plans. With this, you can contribute any amount that you like, and receive benefits with taxes. The savings, when used, will count as a gift tax treatment, which will lower your taxes considerably when factored in. These don’t have limits on the amount of money you put in, they can be started and given to any state, and you keep control of the money. Some disadvantages to this are that the plan is not guaranteed, so you may loose principal if finance charges change by the time your child goes to school. There is also the problem if there is a withdrawal from your child from school or if they receive a scholarship the money will have no use. If you decide to use the 529 plan, you will also most likely be using a broker to help with the money benefits and limitations.

Another way to help your child with finances and receive benefits at the same time is through the stock market. This way, you can minimize effects of capital gains taxes. You can give your child enough money to pay for their tuition through stock. When your child sells the stock, you can receive a lower tax rate off that stock. The best type of stock to invest in will consist of a mix of stocks, have reinvestment plans, receive mutual funds, and are best started when the child is young.

A third way to have money for your child’s education is through family scholarships. Through different types of scholarships, you can receive a given amount of tax credit for the family. Along this line, there are also several loans available from financial aid. This is one way to help with your child’s education, your credit, as well as making another investment that can cut off on taxes. Depending on the school, there may also be aid available through grants or scholarships for the family while the child receives their education.

One thing that most say is if you decide to invest in a child’s fund, it is also important to continue to invest in your own retirement accounts and other things. There are options to loan from yourself in another account if you need more money. This will also help in case your child decides not to go to school right away. Your entire investment will not be in one area.

There are several options to help fund your child’s school. The main key is to begin investing early and to look into all of the different ways that will benefit both you and your child. By knowing what will best fit you, you will be able to have taxes reduced, build credit and invest in something that will help your child for a lifetime.

Often, when your lender scrutinizes your loan application for a new home or piece of property so finely that it is finally turned down, it can be very distressing. If this happens, you should be able to understand just why such a decision was taken and do what you can to remedy the situation. The cause for rejection given below will help you understand just why it happens to some people.

Causes for rejection:

The appraised value is far too low: Your lender perhaps found the ratio of the loan amount to the sale price or the appraised value of the property to be substantially lower than the purchase price or loan-to-value (LTV) ratio. Or perhaps the LTV is higher than your lender is allowed to approve. Then, perhaps you have applied for 90-95% of the purchase price as the loan amount. A low appraisal will then make your loan request far too large.

If the seller’s price of the property far outstrips the prevailing rates in your locality, you would be best advised to renegotiate the price with him so that it conforms to the prices in the area. It should also be one which your lender would not refuse in order to pass your loan request. If this can’t be done, it might be a better idea to accept a smaller loan amount, and pay the balance from your personal funds.

Insufficient funds: When your lender goes through your financial information and you’re verification of deposit, he will find that you do not have enough funds to make the necessary down payment and cover closing costs. Even if these funds do not come from a loan, a gift could go a long way. Alternatively, you could ask the seller to take back a second mortgage on the property. This would help lower your down payment or get the seller to pay some of the closing costs, perhaps the origination fees. After all this, you could ameliorate the situation by just waiting in the wings, while you begin a savings scheme.

Do you have insufficient income? Lenders will refuse your loan application if they find that the mortgage payment on your property exceeds 28 percent of your monthly gross income. In addition, if your total debt including mortgage payments and other installments exceed 36 per cent, you stand to be refused. The figures are higher for FHA loans. But the situation can improve for you if your credit card record is good and you can prove that you already are carrying a huge household expense including rent or mortgage payments, perhaps your lender will swing his decision in your favor. This is just why you need to make a clean breast of your income and expenses while making an application.

Up to your eyes in debt: Often, lenders don’t reject applications solely because of the amount of debt they carry on their heads. It is also the many credit cards they possess and revolving credit accounts with proof of rising account balances that come close to the limit prescribed. Such information is detrimental if you are out to prove your creditworthiness. To remedy the situation, you will need to pay off as many of your debts as possible and then reapply for a loan.

Poor credit history: What can be more devastating than to have your loan request turned down due to a history of poor debt repayment habits? If your lender sees that you have a history of making late charges often, owing amounts to the bank or insolvency, he’s hardly likely to pass a loan application for purchase of property. Your lender is surely not going to be tolerant of a bad credit record. Even if you have had a low loan-to-value ratios and debt ratios, you cannot wipe out a history of poor credit.

Rejection is not the end of the world: Just because a lender rejects your loan application doesn’t mean you can never own property in all your life. You can take corrective steps to improve your chances of acceptance. But if you work steadfastly at it, you can work a way round your problems. Find out why your loan application was rejected and work towards loan acceptance.

Often, when your lender scrutinizes your loan application for a new home or piece of property so finely that it is finally turned down, it can be very distressing. If this happens, you should be able to understand just why such a decision was taken and do what you can to remedy the situation. The cause for rejection given below will help you understand just why it happens to some people.

Causes for rejection:

The appraised value is far too low: Your lender perhaps found the ratio of the loan amount to the sale price or the appraised value of the property to be substantially lower than the purchase price or loan-to-value (LTV) ratio. Or perhaps the LTV is higher than your lender is allowed to approve. Then, perhaps you have applied for 90-95% of the purchase price as the loan amount. A low appraisal will then make your loan request far too large. 

If the seller’s price of the property far outstrips the prevailing rates in your locality, you would be best advised to renegotiate the price with him so that it conforms to the prices in the area. It should also be one which your lender would not refuse in order to pass your loan request. If this can’t be done, it might be a better idea to accept a smaller loan amount, and pay the balance from your personal funds.

Insufficient funds: When your lender goes through your financial information and you’re verification of deposit, he will find that you do not have enough funds to make the necessary down payment and cover closing costs. Even if these funds do not come from a loan, a gift could go a long way. Alternatively, you could ask the seller to take back a second mortgage on the property. This would help lower your down payment or get the seller to pay some of the closing costs, perhaps the origination fees. After all this, you could ameliorate the situation by just waiting in the wings, while you begin a savings scheme. 

Do you have insufficient income? Lenders will refuse your loan application if they find that the mortgage payment on your property exceeds 28 percent of your monthly gross income. In addition, if your total debt including mortgage payments and other installments exceed 36 per cent, you stand to be refused. The figures are higher for FHA loans. But the situation can improve for you if your credit card record is good and you can prove that you already are carrying a huge household expense including rent or mortgage payments, perhaps your lender will swing his decision in your favor. This is just why you need to make a clean breast of your income and expenses while making an application. 

Up to your eyes in debt: Often, lenders don’t reject applications solely because of the amount of debt they carry on their heads. It is also the many credit cards they possess and revolving credit accounts with proof of rising account balances that come close to the limit prescribed. Such information is detrimental if you are out to prove your creditworthiness. To remedy the situation, you will need to pay off as many of your debts as possible and then reapply for a loan. 

Poor credit history: What can be more devastating than to have your loan request turned down due to a history of poor debt repayment habits? If your lender sees that you have a history of making late charges often, owing amounts to the bank or insolvency, he’s hardly likely to pass a loan application for purchase of property. Your lender is surely not going to be tolerant of a bad credit record. Even if you have had a low loan-to-value ratios and debt ratios, you cannot wipe out a history of poor credit. 

Rejection is not the end of the world: Just because a lender rejects your loan application doesn’t mean you can never own property in all your life. You can take corrective steps to improve your chances of acceptance. But if you work steadfastly at it, you can work a way round your problems. Find out why your loan application was rejected and work towards loan acceptance.

In the recent past, with the prices of homes on the rise, complemented by falling interest rates and a need to convert one’s accumulated home equity into expendable funds, millions of people have got the opportunity to refinance the mortgage on their residence. Often, this has worked to their advantage since refinancing has resulted in a vastly lower interest rate and lower monthly mortgage payments, thereby letting homeowners spend or save a certain part of their incomes that are no longer repayments to their mortgages.

In order to refinance, homeowners sometimes borrow more than they need to pay off an earlier mortgage and so cover the transaction costs of refinancing, and then liquefy the equity they have put together in their homes. With these funds, they make home improvements, repay older debts and buy goods, services or assets they can’t otherwise afford.

Why you should refinance: First, you need to take a good look at your current interest rate to do your best for your funds. It is well worth refinancing your current mortgage if your new interest rate is over ½% to 5/8% your current interest rate. But if you want to lower your closing costs as far as possible, see that your current rate is at least 1% lower.

How much can refinancing save you? This depends on several factors relating to your present mortgage situation. If your interest rates are low, it can bring in substantial savings to your funds, perhaps even thousands of dollars! And when rates rise, refinancing from a conventional loan to a variable rate loan, you can stand to gain substantially.

Benefits of refinancing: Choosing to refinance a home mortgage is a tough decision and needs careful consideration of one’s costs and the benefits that will accrue from refinancing. You will realize that when interest rates on mortgages fall below the rate on your existing loan, it’s a good idea to refinance. At a time like this, you need to look at the prospective after-tax savings from lower monthly payments if you were to take a lower-rate loan and compare it with the after-tax expenses of refinancing. This would include mortgage fees or points, application and appraisal fees. As the loan is repaid, the savings from your lower interest payments begin to accumulate. As a result, the funds that would have been saved due to refinancing must be discounted at the present rate and compared with the transaction or closing costs.

People usually go in for refinancing to save money, but there are other reasons also, such as:

Reducing your monthly loan installment: If you reduce your monthly mortgage installments, you can end up refinancing your existing loan at a lower rate of interest. This can save you funds in the long run.

Consolidating your debts: Perhaps you prefer to refinance to consolidate your debts (e.g. a student loan or a loan on a credit card) and prefer paying a low-interest loan rather than a high-interest one. Now, you can clear all your outstanding debts and replace them with just one low-cost cheaper monthly payout.

More tax deductions: If you have lower interest rates, it means smaller interest deductions on Schedule A.

Mortgage interest: You are allowed to deduct interest on a debt of up to $1 million incurred to buy your house and one more home. Also deductible is interest on up to $100,000 of home equity loans due to these two residences. If you refinance a mortgage, the interest on this loan is deductible to the limit of old mortgage plus $100,000.

Points: The interest charges you pay up-front or points are really interest that’s pre-paid and must therefore be deducted proportionately during the tenure unless you have purchased or improved your existing principal property.

Also, if you have bought a holiday home or real estate as an investment, points should be deducted proportionately over the loan term. Or, if you have refinanced a mortgage on which you had been reducing points proportionately, you could stand eligible for a tax bonus. Now, you can subtract any part of the points for the mortgage already paid off that you had not yet deducted since the year of refinancing.