Purchasing a home is a major expense that requires a significant and long term financial commitment. When you initially apply for a mortgage, you are approved for loan funding based on your financial status at the time of application. Most people do not expect that their financial situations will get worse over time, but in some cases that is exactly what happens. Whether through the loss of employment or the death of a family member, it is an unfortunate fact that many people find themselves in situations that keep them from being able to keep up with their home loan payments.

Importance of Mortgage Protection Insurance

For many families, making mortgage payments would become difficult or even impossible in the event of the death of one or more members of the household. Before investing in a home, it is important to stop and think about how the house payments could be made if a major source of household income were to become permanently unavailable as the result of an unanticipated death.

While no one wants to think that their family will ever face a worst case scenario, it’s necessary to make contingency plans for every possible situation. Mortgages are such a large expense that it is important to consider how one’s family would be able to avoid the threat of foreclosure, in addition to losing a loved one, if such a situation were to arise. Fortunately, it is possible to protect your family from having to face the possibility of such a situation by investing in mortgage protection insurance.
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What Are Mortgage Backed Securities?

Mortgage backed securities are securities that are backed by the principle and interest payments on a group of mortgage loans. Lenders group together mortgages and the money that is repaid by the borrowers’ pays investors in the mortgage backed securities.

Why Do Mortgage Lenders Issue Mortgage Backed Securities?

There are a variety of reasons that lending institutions issue mortgage backed securities rather than holding the mortgage themselves. Most lenders have a limited amount of liquid assets. By selling mortgages they are able to free up money in the short term to make additional loans.

Another reason that mortgage lenders sell off their loans as mortgage backed securities is to minimize their risk. Although every effort is made to establish the creditworthiness of an individual before a loan is made, circumstances can change. If a borrower defaults on his mortgage, the lender will have unplanned for expenses just in dealing with repossession and selling of the property. Adding in the lost principal and interest, and a small, local lender could find themselves in a financial mess very quickly.

When a lender sells a mortgage as a mortgage backed security, they receive their money up front, both the loaned amount and a percentage of the loan as their fee. The investors in a mortgage backed security then receive income each month, as the borrower pays back the principal plus interest on his loan.

Types of Mortgage Backed Securities

There are a variety of mortgage backed securities. The majority of mortgage backed securities are issued by the Government National Mortgage Association, otherwise known as Ginnie Mae, the Federal National Mortgage Association, or Fannie Mae, and the Federal Loan Mortgage Company, or Freddie Mac. These are all groups sponsored by the federal government. While Ginnie Mae is backed by the full faith and credit of the government, and guarantees its investors that they will receive their payments, both Fannie Mae and Freddie Mac have the authority to borrow from the Treasury, which makes them relatively safe investments as well.

In addition to the government agencies, brokerage firms and banks often offer mortgage backed securities. These are known as private-label securities.

Are Mortgage Backed Securities Risky?

Mortgage backed securities are not generally considered a risky investment. To obtain a mortgage, the borrower must go through a qualification process that assures the bank or lending institution that the loan will be paid back. The group who sets up the mortgage backed security will then group mortgages together in order to sell. By pooling the mortgages together, the risk to the investor is minimized. One borrower, who defaults on a loan, or, conversely, pays the loan off early, depriving the group of years of interest payments, will have less of an effect when he is a member of a large group. The same borrow, particularly one who defaults on a mortgage, can cause a real financial shock to a small lending institution.

Do Mortgage Backed Securities Make a Good Investment?

All investment decisions are extremely personal, and will depend on your personal needs. Decisions on investments are best made with help from a financial advisor. For someone who would like a monthly income, a mortgage backed security can make a good choice. A mortgage backed security, particularly one sold by Freddie Mac, Fannie Mae, or Ginnie Mae, can be excellent investment vehicles. In general, the greater the amount of loans held in a mortgage backed security, the safer the investment, because the risk is spread over more people.

Before investing in a mortgage backed security, you should find out your expected rate of return. While this can vary, it is nice to know what investors have been receiving. Remember, it is not only loan defaults that can affect your income from a mortgage backed security, but also prepayments and principal only payments. The income from the security is figured on full payment of both principal and interest over the life of the mortgage, typically 15 or 30 years. Any action taken by anyone holding a mortgage in the security can affect your income. It is important to be clear about this with the person you purchase the security from.

Mortgage backed securities are an excellent development for borrowers, lenders, and investors. No matter what group you are in, it is important to understand exactly how they work and what you can expect. By doing that, you are better able to make a wise financial decision.

What is a Home Repair Grant?

Home repair grants are a way for people to pay for home repairs that may otherwise remain unfixed. Home repair grants can bring electric wiring up to code, repair or replace septic systems, and add energy saving features such as insulation and storm windows.

Home repair grants are available from a variety of sources, with differing qualifications. The common denominator is, of course, ownership of the home. Proof of income, work completed by a licensed contractor, and a limit to the dollar amount of the work are all considerations that must be made when finding the appropriate grant.

Home repair grants, as a rule, are for repairs necessary for safe habitation of the home or to make the home more energy efficient. Home repair grants will typically not cover painting, home additions, or landscaping.

Who Provides Home Repair Grants?

Home repair grants can come from a variety of sources. The federal government, through the United States Department of Agriculture, is one provider of home repair grants. Many states and communities also provide home repair grants. While it may seem impossible to find these grants, don’t be discouraged.

One way to find local recommendations for home repair grants is to contact your local bank or other lending institution. Familiar with home repair issues, most lending institution can point you in the direction of an appropriate granting agency.

If your housing situation needs immediate help, you should contact your local municipality. Many communities offer emergency grants for immediate needs, such as a broken furnace or water problem.

Who Can Qualify for a Home Repair Grant?

Home repair grants are typically aimed at those people that would not qualify for a traditional home equity line of credit or personal loan. Whether due to age, income, or credit history, home repair grants can close the gap between a traditional home improvement loan and allowing a home to fall into a state of uninhabitable disrepair.

If, after researching your options, you find that you do not qualify for a home repair grant, there are other choices available. The same agencies that provide home repair grants many times will also offer low interest loans. While there are still stipulations on the types of home repairs that can be implemented with this money, the qualifying process is typically less rigorous than for a line of home equity credit from a lending institution.

Will My Home Repair Be Covered By A Home Repair Grant?

Home repair grants cover a variety of home improvement projects. Typically projects that are funded by the federal government have stringent guidelines for approval. Generally speaking a home that has safety concerns, such as outdated electrical wiring or an old porch that makes entering and exiting the house potentially dangerous would be considered for a home repair grant. A federal grant may also pay for adding insulation, repairing or replacing windows and doors, or doing other types of work to make the home more energy efficient. A federal grant will not pay for a kitchen remodel, adding closets or storage space, or other project that could be considered cosmetic. In addition, a federal grant will not pay for repairs on a home that will remain questionably habitable even after repairs.

State and community level grants have different qualifying standards, and vary greatly. While some grants will mirror closely the directives of the federal programs, other grant programs are for a particular purpose. Some programs are aimed at making homes more energy efficient, more attractive, or preserving original structures. These programs, while still maintaining tough standards for qualifications, can be an excellent way to obtain money if your project lines up with their purpose.

Other state and local grant programs are geared toward particular recipients, whether they are first time homeowners, the elderly or other groups within the population. If you qualify for one of these grants, you may find fewer restrictions on the type of home improvements that you may make. As with any grant program, it is important to make sure that your plans match up with the plans of the grant making organization before you begin the remodeling process.

While it may seem that applying for and accepting grant money limits the options available to homeowners, the reality is very different. Home repair grants are a way for people that would not normally be able to make improvements to their homes to do so. In addition to making their homes a safer and more comfortable place to live, they also increase their property values as well as the value of the neighborhood.