Home Purchase Frequently Asked
Questions (FAQ)
What is Mortgage?
Mortgage is a loan obtained to purchase
real estate.
Mortgage
Basics?
Besides the actual type of mortgage
you select, there are other important
characteristics of your mortgage that
determine exactly how much you will
pay - both monthly and over the life
of your mortgage.
What
to think about?
* Down Payment Options
* Closed, Open and
Convertible Mortgages
* Mortgage Rates: Fixed,
Variable
What
type of loan will be best for me?
A good lender can point out other
loan options you may not be aware
of.
What
will my closing costs be?
Ask your lender for a general summation
of the fees and commissions that will
be required of you at closing.
How
long will I be guaranteed the quoted
interest rate?
This is called locking in a rate.
Ask your lender how long your rate
can be reserved and if there's a fee
involved.
How long will the approval take?
This varies, so get an estimate,
especially if you're on a deadline.
Mortgage
Broker vs. Mortgage Banker!
A mortgage broker charges dramatic
fee for every service, but then he
has access to wide variety of loan
programs. He would also have knowledge
of how to present your loan application
to various lenders for approval. Some
of mortgage bankers are brokers as
well. As an investor it is always
wise to have both mortgage broker
and a mortgage banker on your side.
You all need to remember that mortgage
brokering is an unlicensed profession
in many of the states.
What
different types of mortgages are
out there?
* Fixed-rate mortgage.
You pay the same monthly payment and
interest rate of principal and interest
for the span of the mortgage. The
most customary terms are 15, 20 and
30 years. Fixed-rate mortgages are
most desirable if you plan on being
in your home for a while.
* Adjustable-rate mortgage
(ARM).
The interest rate stays the same for
an initial interest rate period, which
lasts from 1 to 7 years. Then the
rate will adjust higher or lower annually
for the life of the loan based on
a specific index. An ARM is a good
option if you believe interest rates
will become lower over the next few
years or if you plan on living in
your home 5 to 7 years or less.
* Combination loan.
A loan where you receive a first mortgage
combined with a second mortgage at
the same time. This choice may help
you avoid the costs of a private mortgage
insurance (PMI) and/or the higher
rate of a jumbo loan with as low as
10% down. The most used combinations
are 80-10-10 (80% first, 10% second,
10%down), 75-15-10 (75% first, 15%
second, 10% down).
What
should I know before buying a home?
* Get pre-approved online before
you start looking.
* Set a budget and
stick to it
* Know what you really want
in a home
* Make a reasonable offer
* Choose your loan
(and your lender) carefully
* Consult with your lender
before paying off debts
* Keep your day job
* Don’t shift money around
* Don’t add to your debt
* Timing is everything.
How
much cash will I need for a down
payment and closing costs?
Depending on your credit and the
loan amount, you may be able to get
a home with 0% down. However, the
more you put down, the lower your
monthly payment will be. And if you
can provide a 20% down payment, you’ll
avoid the extra monthly cost of Private
Mortgage Insurance (PMI).
What
is homeowner’s insurance?
Homeowner’s insurance is designed
to protect your home. It is also known
as hazard insurance, or fire insurance.
While the lender requires this coverage,
you determine which insurance company
will carry the policy. Homeowner’s
insurance premiums are either paid
directly to the insurance agency or
by your lender through an impound/escrow
account.
What is negative amortization?
This can occur with flexible-payment
loans which allow you, at times, to
choose to make a payment that is lower
than the monthly interest you incur.
The difference in interest is then
added to your loan balance. This is
called negative amortization.
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