The world of mortgages
can be very overwhelming when you first look at all
of the options. There are so many terms, regulations,
different fees, options, and different forms that it
can become very confusing. But with a little understanding
and research on exactly what mortgages are all about,
you will find that it will be a lot easier to apply
and get the home of your dreams. Below is some information
on mortgages and some of the things that go along with
them, like fees and terms, to help give you a little
understanding on the subject.
Types of mortgages:
There are many types of mortgage options available.
The three main types are fixed rate, convertible and
special loans.
The fixed rate home loan in which you have
options like:
• 30year loan – where you pay a fixed fee
over the course of 30 years.
• 15 year loan – where you pay a fixed fee
over the course of 15 years
• Biweekly – where you pay your repayments
every two weeks.
• Adjustable rate mortgage or ARM – where
you pay you variable amounts each repayment, they are
based on the interest rate.
Convertible loans that include:
• Hybrid and convertible ARM – where you
can covert between a fixed rate or an ARM
• Interest only loans – where you only pay
the interest each payment until you are able to put
down a lump sum.
• Balloon loans – where you pay only the
interest and at the end of the term you pay the total
amount due all in one large payment.
• Reverse mortgage – for equity rich seniors
and don’t have to make any repayments until sale
of the house.
• Buy down loan – a loan that works on points
to lower interest rates.
And the last category of loans is special loans:
• FHA loan – for first home buyers and people
with credit problems.
• Veteran Affairs mortgage loan – only for
people and widowers of the armed forces.
With all these mortgage options and more there will
definitely be one that will suit your needs.
Fees:
There are many types of fees when it comes to mortgages,
some of these fees and what they are for include:
• Appraisal – where you pay for a person
to do an appraisal on what your completed home’s
value will be.
• Organization – a fee that pays the lender
and their workers for processing your application and
other related duties.
• Down payment – what you put down on a
deposit on your home, this is usually about 1–20%
• Closing costs – this pays for the transfer
of your ownership of the home, this is usually 1-3%
of your loans total but it can vary.
Other terms:
There are many other terms that you should know when
going into the mortgage field. Below are some of them
and what they mean.
• Points – these are used to lower your
interest rate and are usually done by a lump sum payment
at the closing.
• Good faith estimate – this is when you
are given that total in amount of fees you will have
to pay when it comes to the closing.
• Loan locks – this is where you and the
mortgage company or lender agree on a set interest rate
at the beginning of the mortgage process, if you don’t
lock your loan the interest rate can increase or decrease.
• A truth in lending disclosure – this form
gives you the complete cost of your loan in both a percentage
and dollar form.
• Pre qualifying – this is where you qualify
for a loan before you actually go for one, it is a good
way to review your financial status and lets you determine
what amount of loan will suit your budget.
• PITI – this means principle (amount of
your loan), interest, taxes and insurance, all of these
things are crucial to your mortgage and your repayments.
• Escrow – this is where money and important
information is held by a third party while two people
are in a business transaction.
There is so much information you need to take in when
you go into the world of mortgages but hopefully the
above has given you a little bit of understanding of
what it is all about. This should help you ease into
the mortgage field a little easier. A financial professional
or your lender will be happy to go through all the details
with you when you are having trouble.
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