The world of home buying has changed dramatically in recent decades, most especially as a result of the growth of the Internet. The lending industry used to be tight, with all lenders offering pretty much the same deal. But the massive increase in competition means that it is now more likely to get a home loan with bad credit than ever before.
The doors of opportunity are open to practically everyone, and with a wider range of loan deals available than ever before, even getting a mortgage approval without a down payment has become possible.
Of course, that does not mean that securing funding to buy a home has become easy. There are still criteria that must be met before lenders will even entertain the idea of granting a home loan, never mind offer one with no required money down.
The Role of the Down Payment
The down payment has been a very important part of the home-buying process. It has two roles: firstly, it seals the deal that is struck between the buyer and the real estate agent; and secondly, it reduces the size of the required mortgage. This was a very handy factor when seeking a home loan with bad credit.
Normally, a down payment of about 10% is expected, but it depends on the mortgage provider and whether they are offering a 90% mortgage. Some might only offer 80%, making it necessary to raise a down payment of 20%. If the property is worth 0,000, then that translates to a sum of ,000.
Securing mortgage approval without a down payment was always a difficult thing, since by granting the complete mortgage, the lender was effectively accepting all of the risk. Also, the borrower has no equity to fall back on, leaving them vulnerable. A 100% home loan has always been a risky option.
Advantages of No Money Down
Usually, buying a home requires a considerable amount of preplanning and saving so that a sizable down payment can be made to secure the property wanted. The idea is that the likelihood of getting a home loan with bad credit is increased when the size of the required mortgage is lower.
But by removing the need to make a down payment, the home buyer needs to secure a loan worth 100% of the purchase price. This pushes the debt up, the interest up and the overall costs up. However, getting approval without a down payment means there is no longer a dependency on saving a large cash sum in advance of an application.
The upshot is that the application for a home loan can be submitted perhaps years earlier, and all of the available excess income can be used to repay the mortgage rather than putting a share away to save the down payment.
Terms to Look Out For
Finding excellent terms when applying for a home loan with bad credit can be tricky, but when no down payment is being offered, then it becomes very difficult. This is because, by accepting the full risk, the mortgage provider raises the interest rate to cover any potential losses. With a 0,000 property, this can mean repayments of as high as 0 per month over 30 years.
Approval without a down payment will result in the costs being higher but if the term of the loan is extended to as long as possible, then the monthly repayments can be kept very low. And while the interest paid over the lifetime of the home loan will be very high, the home is at least affordable, which can make it all worthwhile.
Showing posts with label Money. Show all posts
Showing posts with label Money. Show all posts
Friday, May 4, 2012
Monday, April 23, 2012
From Your Account To Your Purse: How ATMs Give You Your Money
Over the last half century, automated teller machines or ATMs as they're more commonly known have revolutionised the way we bank. Initially created simply to dispense cash, today's ATMs perform a range of functions. In the 21st century, you can use an ATM to deposit cash as well as withdraw it from your account, check your balance and to top up your mobile phone. Many ATMs also have multi-lingual capabilities and touch screen functionality, making them more relevant and useful in today's globalised world.
But how exactly do ATMs work? Read on to find out more about this ground-breaking machine and how it gets your money from your account to your purse.
How ATMs work
If you've just opened a bank account, or you're simply new to ATMs, it's important to distinguish between their various components and buttons. The first step is to insert your bank card into the machine. It will then prompt you to enter your four-digit PIN which will have been given to you by your bank. Provided you have entered your PIN correctly, you'll then be asked which function you'd like to complete: for instance, a cash withdrawal, a balance check or a mobile top up. If you're withdrawing cash the most common use of an ATM you must specify how much you need. You'll hear the faint whooshing sound of notes being counted before your cash is dispensed. You can also opt to print a receipt, or sometimes a mini balance statement of your last few transactions.
Of course, the money doesn't magically fly from your bank account to the ATM. Essentially, each ATM is connected to a host processor. When you insert your card and PIN to request cash, the host routes the request to your bank or building society. Provided you have enough money, this triggers an electronic funds transfer from your bank account to the host's account. When the funds have been transferred, an approval code is sent to the ATM asking it to release the cash. The merchant running the machine will then be reimbursed by the host account soon after the transaction. It sounds like a complex process, but to the customer using the ATM it takes place in a matter of seconds.
Advantages of using ATMs
Whether or not you use an ATM to obtain cash from your account is usually a personal preference, but there are many advantages to the technology. Its primary benefit is convenience. Previously, people could only obtain money when bank branches were open. With ATMs, you have access to your money 24 hours a day. And although there may be queues at some ATMs they are usually cleared much faster than they would be in a bank, since there is no need to fill out withdrawal forms or sign receipts.
Often, you can withdraw money from any bank's ATM at no extra charge too, though it's important to remember that some ATMs may charge you to take out money. And with significant improvements to global ATM management software in recent years, it's now easier than ever to withdraw money from an ATM wherever you might be in the world.
But how exactly do ATMs work? Read on to find out more about this ground-breaking machine and how it gets your money from your account to your purse.
How ATMs work
If you've just opened a bank account, or you're simply new to ATMs, it's important to distinguish between their various components and buttons. The first step is to insert your bank card into the machine. It will then prompt you to enter your four-digit PIN which will have been given to you by your bank. Provided you have entered your PIN correctly, you'll then be asked which function you'd like to complete: for instance, a cash withdrawal, a balance check or a mobile top up. If you're withdrawing cash the most common use of an ATM you must specify how much you need. You'll hear the faint whooshing sound of notes being counted before your cash is dispensed. You can also opt to print a receipt, or sometimes a mini balance statement of your last few transactions.
Of course, the money doesn't magically fly from your bank account to the ATM. Essentially, each ATM is connected to a host processor. When you insert your card and PIN to request cash, the host routes the request to your bank or building society. Provided you have enough money, this triggers an electronic funds transfer from your bank account to the host's account. When the funds have been transferred, an approval code is sent to the ATM asking it to release the cash. The merchant running the machine will then be reimbursed by the host account soon after the transaction. It sounds like a complex process, but to the customer using the ATM it takes place in a matter of seconds.
Advantages of using ATMs
Whether or not you use an ATM to obtain cash from your account is usually a personal preference, but there are many advantages to the technology. Its primary benefit is convenience. Previously, people could only obtain money when bank branches were open. With ATMs, you have access to your money 24 hours a day. And although there may be queues at some ATMs they are usually cleared much faster than they would be in a bank, since there is no need to fill out withdrawal forms or sign receipts.
Often, you can withdraw money from any bank's ATM at no extra charge too, though it's important to remember that some ATMs may charge you to take out money. And with significant improvements to global ATM management software in recent years, it's now easier than ever to withdraw money from an ATM wherever you might be in the world.
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