Archive for the 'Non Fiction' Category
Wednesday 19 August 2009 @ 11:49 pm
James Copper asked:
The advent of the Internet has really revolutionised the mortgage industry. Now days you do not need to visit your local mortgage broker or bank to arrange a home loan, everything can be done sitting in front of your computer.
Not only does this make the whole process quicker and easier but also means you have much more choice and power. Now you can use a mortgage broker hundreds of miles away if their offerings are better.
More and more mortgage brokers are setting up online in order to generate leads as their traditional marketing methods are no longer that effective. Although the majority of online mortgage brokers are reliable and honest, there are still a number that are dodgy.
To find a good mortgage broker or lender you need to compare rates and do some thorough research to find reputable companies. Mortgage magazines and online reviews can often be a place to start.
Mortgage Broker Services
A mortgage broker will typically work with several lenders to find the best rates and deals. Whether you have a good or bad credit history, a mortgage broker will be able to find you a lower rate than if you went to your local bank. Do make sure that you use a mortgage broker that has access to a wide range of lenders.
Online mortgage broker quotes are very similar to the quotes given by mortgage brokers in the offline environment, except lower. With the reduced cost due to a simplified application process and reduce overhead for office space and personnel, online mortgage brokers can offer loans with small fees and/or lower interest rates.
It is important to remember that brokers are paid by adding on a fee to the loan, so when shopping around find out what fee they charge as well.
Online and traditional mortgage brokers differ in their sales style when relaying quotes to you. A traditional mortgage broker will use sales tactics to pressure you to complete the mortgage application right there. Many people feel the need to make a quick decision rather than taking the time to process the information.
Online mortgage brokers offer a different approach in that they will provide the information and then wait for you to take the next step. After requesting a mortgage quote, you will receive rates either through the web site, email or over the phone that you can then review at your own pace.
You can choose to apply with a specific mortgage lender, or decide that none of them are best for you and approach another broker. You have much more control and power with an online mortgage broker.
Online mortgage brokers have reduced the time it takes to compare lenders by consolidating information about several lenders into one site. Through such mortgage sites, you only enter your information once to receive interest rates from several different mortgage lenders. Just remember that these rates may not be 100% accurate.
Both traditional and online mortgage brokers can give you an instant generic interest rate quote to narrow your choices from a mortgage lender. However, to get a true quote, you will need to provide detailed personal and financial information.
With a traditional mortgage broker, the process can take a couple of days to process the information and meet with the mortgage broker to review rates.
Online mortgage brokers are connected to lender databases that are updated in real time. This allows them to give you a near instant quote and process the application very quickly.
Compare Rates And Fees
While online mortgage brokers make getting quotes easy, it is important to still take the time to compare rates and deals carefully.
Your mortgage rate will be based on current interest rates, the propertys location, your credit score, and employment history. If you receive a rate quote without providing this detailed information, then you will be just getting a rough estimate.
Rough estimates for mortgage rates are still useful, as you can use them to narrow your search down to a handful of lenders. You can then apply for a real mortgage estimate with the most appealing lenders. With these true mortgage quotes, look at both the rates and fees to determine the actual cost of the loan.
Interest rates arent the only factor to consider when comparing mortgage lenders. You should also be comfortable with the lenders reputation. Unfortunately, there is not a list of reputable mortgage lenders, but common sense can protect you from a bad mortgage lender.
Online mortgage brokers have automated much of the mortgage process, reducing overheads and costs. As a way to stay competitive, many of these brokers and lenders have eliminated or reduced their fees.
Fees are the hidden costs of loans. Mortgage brokers are paid a fee from the lender and possibly from you as well. The advantage of a mortgage broker is that they find the best mortgage rates for you. So even with their fee added into the loan, you still can expect to save money.
They will also have access to a number of lenders that are not available to the general public. The only way you have access to such lenders is by using a mortgage broker.
So next time you are in the market for a mortgage be sure to contact a number of mortgage brokers and find out what lenders they have on their panel, their fees, all other fees (such as solicitor, valuation, etc) and turnaround time.
Set aside some time to do this and never rush into signing anything until you know the facts and have had a good shop around.
The advent of the Internet has really revolutionised the mortgage industry. Now days you do not need to visit your local mortgage broker or bank to arrange a home loan, everything can be done sitting in front of your computer.
Not only does this make the whole process quicker and easier but also means you have much more choice and power. Now you can use a mortgage broker hundreds of miles away if their offerings are better.
More and more mortgage brokers are setting up online in order to generate leads as their traditional marketing methods are no longer that effective. Although the majority of online mortgage brokers are reliable and honest, there are still a number that are dodgy.
To find a good mortgage broker or lender you need to compare rates and do some thorough research to find reputable companies. Mortgage magazines and online reviews can often be a place to start.
Mortgage Broker Services
A mortgage broker will typically work with several lenders to find the best rates and deals. Whether you have a good or bad credit history, a mortgage broker will be able to find you a lower rate than if you went to your local bank. Do make sure that you use a mortgage broker that has access to a wide range of lenders.
Online mortgage broker quotes are very similar to the quotes given by mortgage brokers in the offline environment, except lower. With the reduced cost due to a simplified application process and reduce overhead for office space and personnel, online mortgage brokers can offer loans with small fees and/or lower interest rates.
It is important to remember that brokers are paid by adding on a fee to the loan, so when shopping around find out what fee they charge as well.
Online and traditional mortgage brokers differ in their sales style when relaying quotes to you. A traditional mortgage broker will use sales tactics to pressure you to complete the mortgage application right there. Many people feel the need to make a quick decision rather than taking the time to process the information.
Online mortgage brokers offer a different approach in that they will provide the information and then wait for you to take the next step. After requesting a mortgage quote, you will receive rates either through the web site, email or over the phone that you can then review at your own pace.
You can choose to apply with a specific mortgage lender, or decide that none of them are best for you and approach another broker. You have much more control and power with an online mortgage broker.
Online mortgage brokers have reduced the time it takes to compare lenders by consolidating information about several lenders into one site. Through such mortgage sites, you only enter your information once to receive interest rates from several different mortgage lenders. Just remember that these rates may not be 100% accurate.
Both traditional and online mortgage brokers can give you an instant generic interest rate quote to narrow your choices from a mortgage lender. However, to get a true quote, you will need to provide detailed personal and financial information.
With a traditional mortgage broker, the process can take a couple of days to process the information and meet with the mortgage broker to review rates.
Online mortgage brokers are connected to lender databases that are updated in real time. This allows them to give you a near instant quote and process the application very quickly.
Compare Rates And Fees
While online mortgage brokers make getting quotes easy, it is important to still take the time to compare rates and deals carefully.
Your mortgage rate will be based on current interest rates, the propertys location, your credit score, and employment history. If you receive a rate quote without providing this detailed information, then you will be just getting a rough estimate.
Rough estimates for mortgage rates are still useful, as you can use them to narrow your search down to a handful of lenders. You can then apply for a real mortgage estimate with the most appealing lenders. With these true mortgage quotes, look at both the rates and fees to determine the actual cost of the loan.
Interest rates arent the only factor to consider when comparing mortgage lenders. You should also be comfortable with the lenders reputation. Unfortunately, there is not a list of reputable mortgage lenders, but common sense can protect you from a bad mortgage lender.
Online mortgage brokers have automated much of the mortgage process, reducing overheads and costs. As a way to stay competitive, many of these brokers and lenders have eliminated or reduced their fees.
Fees are the hidden costs of loans. Mortgage brokers are paid a fee from the lender and possibly from you as well. The advantage of a mortgage broker is that they find the best mortgage rates for you. So even with their fee added into the loan, you still can expect to save money.
They will also have access to a number of lenders that are not available to the general public. The only way you have access to such lenders is by using a mortgage broker.
So next time you are in the market for a mortgage be sure to contact a number of mortgage brokers and find out what lenders they have on their panel, their fees, all other fees (such as solicitor, valuation, etc) and turnaround time.
Set aside some time to do this and never rush into signing anything until you know the facts and have had a good shop around.
Sunday 9 August 2009 @ 2:36 am
Ed Lathrop asked:
There’s a new kind of mortgage, and it’s taking the refinance world by storm. The promoters of this new kind of loan claim that you can pay it off in full in eight years without changing your budget at all! This sounds like it would be ideal for any homeowner. Let’s take a look at this mortgage and see if we can figure out if it is really all its cracked up to be.
This new kind of mortgage is commonly referred to by many different names, but because its purpose is to accelerate the paying off of a mortgage, we will refer to it as an accelerating mortgage. This accelerating mortgage makes use of compounded daily interest, instead of, monthly interest. It also makes use of the fact that the borrower and co-borrower deposit their entire paychecks into a mortgage account each time they get paid. Then, they actually use their mortgage account as their checking account and pay their regular monthly expenses by writing checks against the mortgage account. The process of depositing money into the mortgage account before using it for everyday expenses saves interest because of the daily compounding used by the accelerating plan.
What the advertisers for this mortgage don’t mention is, in order to pay off the mortgage very quickly, like in 8 years or so, each month you need to leave more money in the mortgage account than the amount the regular 30-year mortgage payment would be. The mortgage writer or broker will refer to this as your monthly savings and ask if you put aside 10, 15, 20, 25 or more percent for your savings on a monthly basis. The amount you tell him will be the extra amount you will be expected to leave in your mortgage account each month.
I see three problems with this type of mortgage financing. First, the majority of people close on their new houses in a tapped out condition. They save for years to accumulate their down payments and then they buy the most expensive houses they are able to make payments on. To them, their savings is the equity in their houses.
Second, if you have the ability to pay in an extra 10, 15, 20 or 25 or more percent of your salary toward any mortgage, you will pay it off a whole lot sooner than 30 years. For instance, it will take 30 years to pay a $200,000 mortgage at 6% if you are paying the scheduled monthly amount of $1199.10, but if you add $800 to this payment each month, your mortgage will be paid in 11 and one-half years.
It is true, that when comparing an accelerating mortgage with a regular 30-year fixed mortgage, that has the same parameters (principal, interest and term); the accelerating mortgage will reach 0 more quickly than the 30-year mortgage will. However, it would be a matter of several months sooner, not 22 years as some of the advertisements for the accelerating mortgage would lead you to believe.
So, what’s wrong with paying the same amount into a mortgage account, and still getting it paid off sooner? Nothing! But here’s problem number three: an accelerating mortgage uses a HELOC. (Home Equity Line of Credit) there are some things you should know about HELOCs. First their interest rates are usually higher than a conventional 30-year mortgage interest rate. Second, they are adjustable-rate mortgages. On top of that, they have no cap and they adjust every month. What this means is that if you find a fixed rate 30-year mortgage at six percent, you know that in four years that mortgage’s interest rate will be six percent. With a HELOC, you may find one at six percent but in four years you could be paying thirteen percent. So much for paying your mortgage quickly, because as you know, when interest rates rise, so does the monthly payment.
We are now in a time in American history, where interest rates are relatively low. With inflation under control, it looks as though interest rates are trending downward. It may well be that the current interest rate downtrend will continue well into 2008 when it will test the post-1960’s low of 4.75 percent. After that, you never know what the future will bring.
In January 2009, the U.S. will be inaugurating a new president. Many of the candidates running for the high office would like to reverse the free trade policies of the last three presidents. These free trade policies have in large part, brought us the robust economy along with the low interest rates we have enjoyed since the mid ’90s. These candidates also want to end the George Bush tax cuts. These tax cuts have had a tendency to cancel the inflationary effects of higher oil product prices. Some of these candidates also want to institute national health-care. It has been proven that private industry is more efficient than government run entities. Private industry money gets reinvested and creates more money. When money goes to the government as in government run health-care, it is being sent down a one-way dead-end street. This is a very inflationary scenario, and inflation means high interest rates.
Not long ago, I wrote an article about biweekly mortgages. In this article, I called the biweekly plan a scam. I don’t feel the same way about the accelerating plan. I think the accelerating plan is creative and in true mathematical terms, it would pay your mortgage off a little sooner than a regular mortgage, if rates stayed flat. The problem is, at least, the way I see it, there is a potentially unstable interest rate environment on the horizon. I also see some of the promotions for this mortgage as misleading and this makes me worry. Throw in the fact that I have never known anyone to institute an accelerating plan and then pay it off in the prescribed short term, and this makes me see the accelerating plan as speculative. Therefore, I’ve got to believe that for the time being, a fixed-rate mortgage is the best way to go.
There’s a new kind of mortgage, and it’s taking the refinance world by storm. The promoters of this new kind of loan claim that you can pay it off in full in eight years without changing your budget at all! This sounds like it would be ideal for any homeowner. Let’s take a look at this mortgage and see if we can figure out if it is really all its cracked up to be.
This new kind of mortgage is commonly referred to by many different names, but because its purpose is to accelerate the paying off of a mortgage, we will refer to it as an accelerating mortgage. This accelerating mortgage makes use of compounded daily interest, instead of, monthly interest. It also makes use of the fact that the borrower and co-borrower deposit their entire paychecks into a mortgage account each time they get paid. Then, they actually use their mortgage account as their checking account and pay their regular monthly expenses by writing checks against the mortgage account. The process of depositing money into the mortgage account before using it for everyday expenses saves interest because of the daily compounding used by the accelerating plan.
What the advertisers for this mortgage don’t mention is, in order to pay off the mortgage very quickly, like in 8 years or so, each month you need to leave more money in the mortgage account than the amount the regular 30-year mortgage payment would be. The mortgage writer or broker will refer to this as your monthly savings and ask if you put aside 10, 15, 20, 25 or more percent for your savings on a monthly basis. The amount you tell him will be the extra amount you will be expected to leave in your mortgage account each month.
I see three problems with this type of mortgage financing. First, the majority of people close on their new houses in a tapped out condition. They save for years to accumulate their down payments and then they buy the most expensive houses they are able to make payments on. To them, their savings is the equity in their houses.
Second, if you have the ability to pay in an extra 10, 15, 20 or 25 or more percent of your salary toward any mortgage, you will pay it off a whole lot sooner than 30 years. For instance, it will take 30 years to pay a $200,000 mortgage at 6% if you are paying the scheduled monthly amount of $1199.10, but if you add $800 to this payment each month, your mortgage will be paid in 11 and one-half years.
It is true, that when comparing an accelerating mortgage with a regular 30-year fixed mortgage, that has the same parameters (principal, interest and term); the accelerating mortgage will reach 0 more quickly than the 30-year mortgage will. However, it would be a matter of several months sooner, not 22 years as some of the advertisements for the accelerating mortgage would lead you to believe.
So, what’s wrong with paying the same amount into a mortgage account, and still getting it paid off sooner? Nothing! But here’s problem number three: an accelerating mortgage uses a HELOC. (Home Equity Line of Credit) there are some things you should know about HELOCs. First their interest rates are usually higher than a conventional 30-year mortgage interest rate. Second, they are adjustable-rate mortgages. On top of that, they have no cap and they adjust every month. What this means is that if you find a fixed rate 30-year mortgage at six percent, you know that in four years that mortgage’s interest rate will be six percent. With a HELOC, you may find one at six percent but in four years you could be paying thirteen percent. So much for paying your mortgage quickly, because as you know, when interest rates rise, so does the monthly payment.
We are now in a time in American history, where interest rates are relatively low. With inflation under control, it looks as though interest rates are trending downward. It may well be that the current interest rate downtrend will continue well into 2008 when it will test the post-1960’s low of 4.75 percent. After that, you never know what the future will bring.
In January 2009, the U.S. will be inaugurating a new president. Many of the candidates running for the high office would like to reverse the free trade policies of the last three presidents. These free trade policies have in large part, brought us the robust economy along with the low interest rates we have enjoyed since the mid ’90s. These candidates also want to end the George Bush tax cuts. These tax cuts have had a tendency to cancel the inflationary effects of higher oil product prices. Some of these candidates also want to institute national health-care. It has been proven that private industry is more efficient than government run entities. Private industry money gets reinvested and creates more money. When money goes to the government as in government run health-care, it is being sent down a one-way dead-end street. This is a very inflationary scenario, and inflation means high interest rates.
Not long ago, I wrote an article about biweekly mortgages. In this article, I called the biweekly plan a scam. I don’t feel the same way about the accelerating plan. I think the accelerating plan is creative and in true mathematical terms, it would pay your mortgage off a little sooner than a regular mortgage, if rates stayed flat. The problem is, at least, the way I see it, there is a potentially unstable interest rate environment on the horizon. I also see some of the promotions for this mortgage as misleading and this makes me worry. Throw in the fact that I have never known anyone to institute an accelerating plan and then pay it off in the prescribed short term, and this makes me see the accelerating plan as speculative. Therefore, I’ve got to believe that for the time being, a fixed-rate mortgage is the best way to go.
Sunday 9 August 2009 @ 1:22 am
Ed Lathrop asked:
There is a lot of confusion between the terms “reverse amortization mortgage” and “reverse mortgage.” Compounding the confusion is the fact that the word “amortization” is probably the hardest word in the English language to spell. It is commonly written by some very intelligent folks as amorazation or amerazation.
As a result, many people just leave the amortization part out, and do web searches for reverse mortgages when really what they want to find out about, and hopefully learn to avoid, are negative amortization mortgages.
On the other hand, some people may be interested in a reverse mortgage, but end up being solicited by a throng of crazed mortgage brokers who want to sell them a negative amortization mortgage.
Let’s see if we can help lift the fog on these confusing terms that describe a couple of very dissimilar types of mortgages.
A reverse or negative amortization mortgage
A negative amortization mortgage is sometimes referred to as a reverse amortization mortgage. With either terminology, what happens with this type of mortgage is that the principal owed on the mortgage is allowed to increase in the early stage of the mortgage. This early stage is commonly referred to as the negative amortization or negam portion of the mortgage. This negam stage usually lasts 3 to 5 years.
For example, a borrower takes a mortgage on his/her property for $300,000. Under the terms of the mortgage, he/she will be required to make the minimum monthly payment of $988.99 each month for the first 60 months, or 5 years of the mortgage. This 5-year period is, of course, the negam period. When you calculate the interest rate for this negam period you’ll find that it is 1.173%!
When the negam period ends, basically, the party’s over. Under the terms of this particular mortgage, the interest rate increases to 7.75% and that’s not all! The interest rate has been 7.75% all along, but the borrower was not obligated to pay this much during the negam stage of the loan. So, what happened was, the interest that wasn’t being paid during the negam stage was being added on to the principal of the mortgage. Now, 5 years later, the principal that was originally $300,000 has ballooned to $369,241.25!
Let’s run the numbers for the post negam or regular stage of this mortgage. The term of the mortgage is 30 years. So now, there are 25 years left for the borrower to pay $369,241.25 at 7.75%. This will require a minimum monthly payment of $2,788.99, or exactly $1,800 a month more than the borrower has been paying.
These numbers are the exact numbers taken from an existing negative amortization mortgage. There are many variations to how a negam works, but with every one, the monthly payment starts small and the principal increases in the negam period. Then, in the regular period, the required monthly payment increases, sometimes to 2, 3 or even 4 times its original amount.
A reverse mortgage
A reverse mortgage was devised to help retired people augment their income. This type of mortgage is available to people who are 62 years of age and older.
With a reverse mortgage the retiree sells off some of his/her equity in their home and can opt to receive the payment in a lump sum, as monthly payments, or as has become most common, a line of credit to be used at any time for anything.
The person taking the reverse mortgage is not required to pay anything back on the mortgage, but sometimes there is a time limit to which he/she will receive payments on the reverse mortgage.
Many times a reverse mortgage is structured where a person sells his/her equity and in return will receive monthly payments for life. Of course, in this case, after the homeowner is deceased, he/she cannot leave the equity, which has been sold in the reverse mortgage to his/her descendants. So, if all the equity has been used for a reverse mortgage, the deceased person will not be able to leave the home to anyone.
Despite that drawback, a reverse mortgage can be great tool for a retired person to use as a way to add more income to his/her pension and/or social security.
On the other hand a reverse or negative amortization mortgage was devised, in my opinion, as a way for banks and other lenders to drum up more business by qualifying borrowers who may eventually end up in foreclosure because of them.
There is a lot of confusion between the terms “reverse amortization mortgage” and “reverse mortgage.” Compounding the confusion is the fact that the word “amortization” is probably the hardest word in the English language to spell. It is commonly written by some very intelligent folks as amorazation or amerazation.
As a result, many people just leave the amortization part out, and do web searches for reverse mortgages when really what they want to find out about, and hopefully learn to avoid, are negative amortization mortgages.
On the other hand, some people may be interested in a reverse mortgage, but end up being solicited by a throng of crazed mortgage brokers who want to sell them a negative amortization mortgage.
Let’s see if we can help lift the fog on these confusing terms that describe a couple of very dissimilar types of mortgages.
A reverse or negative amortization mortgage
A negative amortization mortgage is sometimes referred to as a reverse amortization mortgage. With either terminology, what happens with this type of mortgage is that the principal owed on the mortgage is allowed to increase in the early stage of the mortgage. This early stage is commonly referred to as the negative amortization or negam portion of the mortgage. This negam stage usually lasts 3 to 5 years.
For example, a borrower takes a mortgage on his/her property for $300,000. Under the terms of the mortgage, he/she will be required to make the minimum monthly payment of $988.99 each month for the first 60 months, or 5 years of the mortgage. This 5-year period is, of course, the negam period. When you calculate the interest rate for this negam period you’ll find that it is 1.173%!
When the negam period ends, basically, the party’s over. Under the terms of this particular mortgage, the interest rate increases to 7.75% and that’s not all! The interest rate has been 7.75% all along, but the borrower was not obligated to pay this much during the negam stage of the loan. So, what happened was, the interest that wasn’t being paid during the negam stage was being added on to the principal of the mortgage. Now, 5 years later, the principal that was originally $300,000 has ballooned to $369,241.25!
Let’s run the numbers for the post negam or regular stage of this mortgage. The term of the mortgage is 30 years. So now, there are 25 years left for the borrower to pay $369,241.25 at 7.75%. This will require a minimum monthly payment of $2,788.99, or exactly $1,800 a month more than the borrower has been paying.
These numbers are the exact numbers taken from an existing negative amortization mortgage. There are many variations to how a negam works, but with every one, the monthly payment starts small and the principal increases in the negam period. Then, in the regular period, the required monthly payment increases, sometimes to 2, 3 or even 4 times its original amount.
A reverse mortgage
A reverse mortgage was devised to help retired people augment their income. This type of mortgage is available to people who are 62 years of age and older.
With a reverse mortgage the retiree sells off some of his/her equity in their home and can opt to receive the payment in a lump sum, as monthly payments, or as has become most common, a line of credit to be used at any time for anything.
The person taking the reverse mortgage is not required to pay anything back on the mortgage, but sometimes there is a time limit to which he/she will receive payments on the reverse mortgage.
Many times a reverse mortgage is structured where a person sells his/her equity and in return will receive monthly payments for life. Of course, in this case, after the homeowner is deceased, he/she cannot leave the equity, which has been sold in the reverse mortgage to his/her descendants. So, if all the equity has been used for a reverse mortgage, the deceased person will not be able to leave the home to anyone.
Despite that drawback, a reverse mortgage can be great tool for a retired person to use as a way to add more income to his/her pension and/or social security.
On the other hand a reverse or negative amortization mortgage was devised, in my opinion, as a way for banks and other lenders to drum up more business by qualifying borrowers who may eventually end up in foreclosure because of them.
Friday 7 August 2009 @ 4:06 pm
Aaron Crawford asked:
Acceleration – This refers to a lender’s right to request immediate payment of the balance of the loan when the borrower defaults or by using a stipulation from a Due on Sale Clause
ARM / Adjustable Rate Mortgage – A mortgage that has an interest rate that is periodically adjusted. This adjustment is based off of criteria from an agreed upon index and is also called a variable rate mortgage.
Amortization – Mortgage split into periodic, equally sized payments so that at the end of the agreed upon mortgage period the balance is paid.
APR / Annual Percentage Rate – Expression of the yearly rate of the mortgage measured by mortgage’s full cost including all expenses and fees.
Appraisal – A documented official estimation of a property’s value.
Assessment – Tax on a property that serves a specific purpose, like sewers for example.
Assumption – The agreement between a buyer and a seller in which the buyer is taking over payments from the seller on the seller’s existing mortgage.
Balloon Mortgage – This is a loan whose amortization schedule exceeds the length of the mortgage. A final (often large) balloon payment is paid at the end of this end of this extended period of time.
Bridge Loan – A secondary trust used for collateral by the homebuyer’s present property, which permits proceeds to be utilized to close on a new property purchase before the existing one is sold.
Buy Down – A buy down occurs when a lender allows a mortgage rate to be lowered by buyer subsidization.
Caps – Safeguards that set limits on the amount of interest rate or payment change on a monthly basis for ARM’s
Change Frequency – The increment of the number of months that a rate may change in an ARM
Closing – The closing is the final meeting that occurs involving the property buyer, the seller, and the lender during which all legally binding papers are signed and the property purchase deal is “closed” and property ownership is transferred.
Closing Costs – The expenses and fees incurred either by a home buyer or seller at a closing for a variety of tasks, charges, insurances, etc.
Conversion Clause – ARM provision for having the mortgage’s rate be converted to a fixed-rate at some point during the life of the loan.
Credit Report – Official documentation noting the status and history of a potential buyer/borrower.
Default – In a nutshell, not making a payment on time; legally failing to provide required payment to lender by specified deadline.
Down Payment – The money paid during a property purchase that fills the gap between sale price and moneys borrowed.
Equity – The amount left over when comparing money owed on a property to the property’s current value.
Escrow – An escrow account is held by the lending institution in which the borrower pays money for insurance or tax reasons. Escrow describes the deposits that are held when a loan is pending closing.
Escrow Payment – The part of a borrowers monthly mortgage payment that the lender holds to pay for insurance, lease, or tax purposes.
Fannie Mae – Federal National Mortgage Association; a government backed organization that buys and sells residential mortgages.
Freddie Mac – Federal Home Loan Mortgage Corporation; a government backed organization that acquires mortgages from various depositary institutions and HUD-approved lenders.
FHA Loan – A loan that the Federal Housing Administration insures, open to any home buyer that meets certain requirements.
Fixed Installment – The regular monthly payment that is due on a mortgage.
Fixed Rate Mortgage – A mortgage loan whose interest rate will not change for the entire duration of the loan.
Foreclosure – Process by which a mortgage lender legally repossesses and forces the sale of a mortgaged property as a result of the borrow defaulting.
GPM / Graduated Payment Mortgage – Flexible mortgage payment plan in which the borrower’s monthly payments increase for a specific timeframe.
GEM / Growing Equity Mortgage – Mortgage in which the borrower’s payments increase over a set period of time; this larger amount is then applied to the mortgage’s principal in most cases.
Hazard Insurance – Insurance used for protection against various forms of property damage and/or loss.
HUD-1 Statement – This is a document provided by your lender/broker that includes a detailed listing of the moneys needed at closing, including points, escrow, commissions, and other fees.
Impound / Reserves – The amount of the buyer’s monthly payment kept by the lender to pay for various insurances or taxes.
Index – The publicly available market interest rate used by lenders to determine the difference between ARM rates and current interest rates and to set loan sale rates on fixed rate mortgages.
Interest – Monetary fee charged by a lender to a buyer for borrowing money.
Interest Rate Ceiling – The agreed largest possible interest rate for an adjustable rate mortgage.
Interest Rate Floor – The agreed lowest possible interest rate for an adjustable rate mortgage.
Interim Financing – A short-term or temporary loan made while property construction is being completed.
Jumbo Loan – A mortgage that exceeds the limits set by Fannie Mae and Freddie Mac.
Liabilities – The debt owed by a buyer.
Lien – A claim made on a piece of property for exacting payment of a financial obligation.
Lock – Mortgage lender’s written guarantee that the quoted rate is good for a set period of days from the time of issuing.
Margin – The total that a mortgage lender adds to the index on an ARM to set the adjusted rate.
Market Value – The price that a buyer and seller would agree upon for sale of a property.
Maturity – The date that a loan’s principal is scheduled to be paid in full.
Mortgage – Document pledging a property to a loan provider as security for a debt’s payment.
Mortgage Broker – One who receives compensation for the work of bringing a buyer to a lender for the purpose of completing a loan arrangement.
Mortgage Insurance – Money paid on a regular basis for the purpose of insuring a mortgage on a property whose buyer has less than 20% equity.
Note – A document specifying that a borrower is to repay a loan at a specific interest rate over a specific period of time.
One Year Adjustable Rate Mortgage / One Year ARM – Loan in which the interest rate changes on a yearly basis.
Origination Fee – Fee charged by a lender for the work involved in preparing a loan.
Owner Financing – Property sale in which the seller provides at least some part of the buyer’s financing.
Payment Change Date – Date when a new payment amount begins on an ARM or GPM.
PITI – Principal, Interest, Taxes, and Insurance
Points / Loan Discount Points – Interest money paid at closings for the purpose lowering the cost of monthly loan payments. One Point is equal to one percent of the loan’s total amount.
Power Of Attorney – The legal authorization of one person being able to act in behalf of another.
Preapproval – The process of evaluation a potential buyer goes through to decide how much money a loan can be given to them for.
Prepayment – Mortgage stipulation permitting the borrower to make additional payments before the maturation date.
Prepayment Penalty – Fee charged by a lender to a borrower when the borrower repays the a loan earlier than an agreed upon date.
Principal – On a loan, the total amount that remains unpaid by the borrower. On a monthly payment, the amount that goes towards the final paying of the loan.
PMI / Private Mortgage Insurance – Insurance that a buyer must pay for; required when a borrower does not provide a 20% down payment on purchase of a new property.
Rate Lock – Commitment given by a lending institution to a buyer that guarantees a certain interest rate is valid for closing for a specified period of time.
Real Estate Agent – A person that is licensed to negotiate the sale of property.
Recission – The cancellation of an agreement or contract; the law giving a homeowner 3 business days to cancel a loan arrangement. “Right of Recission”
Refinancing – The obtainment of a new replacement mortgage on a property that is already mortgaged.
Satisfaction of Mortgage – Document issued to a borrower on the occasion of their repayment of said loan.
Second Mortgage – The acquirement of an additional, subordinate mortgage on a property that is already mortgaged.
Servicing – All the work involved to keep a mortgage in good standing such as paying various tax, insurance, and other costs.
Shared Appreciation mortgage – A mortgage in which the buyer receives a property for less than current market value; in exchange, the seller is granted a portion of future property appreciation values.
Simple Interest – Interest calculated only on the balance owed.
Step Rate Mortgage – A loan in which the interest rate increases based on a set schedule until a set point, after which the rate remains constant.
Title – The document declaring a property’s ownership.
Title Insurance – Insurance policy that insures a potential home buyer or lender against errors in a title search.
Title Search – A legal examination of records to determine who is the rightful owner of a property.
Truth in Lending – Federal law that requires the lenders to disclose the APR to a buyer after applying for a loan.
Underwriting – The decision made by a lender on whether or not to provide a loan to a borrower based on their qualifications.
Acceleration – This refers to a lender’s right to request immediate payment of the balance of the loan when the borrower defaults or by using a stipulation from a Due on Sale Clause
ARM / Adjustable Rate Mortgage – A mortgage that has an interest rate that is periodically adjusted. This adjustment is based off of criteria from an agreed upon index and is also called a variable rate mortgage.
Amortization – Mortgage split into periodic, equally sized payments so that at the end of the agreed upon mortgage period the balance is paid.
APR / Annual Percentage Rate – Expression of the yearly rate of the mortgage measured by mortgage’s full cost including all expenses and fees.
Appraisal – A documented official estimation of a property’s value.
Assessment – Tax on a property that serves a specific purpose, like sewers for example.
Assumption – The agreement between a buyer and a seller in which the buyer is taking over payments from the seller on the seller’s existing mortgage.
Balloon Mortgage – This is a loan whose amortization schedule exceeds the length of the mortgage. A final (often large) balloon payment is paid at the end of this end of this extended period of time.
Bridge Loan – A secondary trust used for collateral by the homebuyer’s present property, which permits proceeds to be utilized to close on a new property purchase before the existing one is sold.
Buy Down – A buy down occurs when a lender allows a mortgage rate to be lowered by buyer subsidization.
Caps – Safeguards that set limits on the amount of interest rate or payment change on a monthly basis for ARM’s
Change Frequency – The increment of the number of months that a rate may change in an ARM
Closing – The closing is the final meeting that occurs involving the property buyer, the seller, and the lender during which all legally binding papers are signed and the property purchase deal is “closed” and property ownership is transferred.
Closing Costs – The expenses and fees incurred either by a home buyer or seller at a closing for a variety of tasks, charges, insurances, etc.
Conversion Clause – ARM provision for having the mortgage’s rate be converted to a fixed-rate at some point during the life of the loan.
Credit Report – Official documentation noting the status and history of a potential buyer/borrower.
Default – In a nutshell, not making a payment on time; legally failing to provide required payment to lender by specified deadline.
Down Payment – The money paid during a property purchase that fills the gap between sale price and moneys borrowed.
Equity – The amount left over when comparing money owed on a property to the property’s current value.
Escrow – An escrow account is held by the lending institution in which the borrower pays money for insurance or tax reasons. Escrow describes the deposits that are held when a loan is pending closing.
Escrow Payment – The part of a borrowers monthly mortgage payment that the lender holds to pay for insurance, lease, or tax purposes.
Fannie Mae – Federal National Mortgage Association; a government backed organization that buys and sells residential mortgages.
Freddie Mac – Federal Home Loan Mortgage Corporation; a government backed organization that acquires mortgages from various depositary institutions and HUD-approved lenders.
FHA Loan – A loan that the Federal Housing Administration insures, open to any home buyer that meets certain requirements.
Fixed Installment – The regular monthly payment that is due on a mortgage.
Fixed Rate Mortgage – A mortgage loan whose interest rate will not change for the entire duration of the loan.
Foreclosure – Process by which a mortgage lender legally repossesses and forces the sale of a mortgaged property as a result of the borrow defaulting.
GPM / Graduated Payment Mortgage – Flexible mortgage payment plan in which the borrower’s monthly payments increase for a specific timeframe.
GEM / Growing Equity Mortgage – Mortgage in which the borrower’s payments increase over a set period of time; this larger amount is then applied to the mortgage’s principal in most cases.
Hazard Insurance – Insurance used for protection against various forms of property damage and/or loss.
HUD-1 Statement – This is a document provided by your lender/broker that includes a detailed listing of the moneys needed at closing, including points, escrow, commissions, and other fees.
Impound / Reserves – The amount of the buyer’s monthly payment kept by the lender to pay for various insurances or taxes.
Index – The publicly available market interest rate used by lenders to determine the difference between ARM rates and current interest rates and to set loan sale rates on fixed rate mortgages.
Interest – Monetary fee charged by a lender to a buyer for borrowing money.
Interest Rate Ceiling – The agreed largest possible interest rate for an adjustable rate mortgage.
Interest Rate Floor – The agreed lowest possible interest rate for an adjustable rate mortgage.
Interim Financing – A short-term or temporary loan made while property construction is being completed.
Jumbo Loan – A mortgage that exceeds the limits set by Fannie Mae and Freddie Mac.
Liabilities – The debt owed by a buyer.
Lien – A claim made on a piece of property for exacting payment of a financial obligation.
Lock – Mortgage lender’s written guarantee that the quoted rate is good for a set period of days from the time of issuing.
Margin – The total that a mortgage lender adds to the index on an ARM to set the adjusted rate.
Market Value – The price that a buyer and seller would agree upon for sale of a property.
Maturity – The date that a loan’s principal is scheduled to be paid in full.
Mortgage – Document pledging a property to a loan provider as security for a debt’s payment.
Mortgage Broker – One who receives compensation for the work of bringing a buyer to a lender for the purpose of completing a loan arrangement.
Mortgage Insurance – Money paid on a regular basis for the purpose of insuring a mortgage on a property whose buyer has less than 20% equity.
Note – A document specifying that a borrower is to repay a loan at a specific interest rate over a specific period of time.
One Year Adjustable Rate Mortgage / One Year ARM – Loan in which the interest rate changes on a yearly basis.
Origination Fee – Fee charged by a lender for the work involved in preparing a loan.
Owner Financing – Property sale in which the seller provides at least some part of the buyer’s financing.
Payment Change Date – Date when a new payment amount begins on an ARM or GPM.
PITI – Principal, Interest, Taxes, and Insurance
Points / Loan Discount Points – Interest money paid at closings for the purpose lowering the cost of monthly loan payments. One Point is equal to one percent of the loan’s total amount.
Power Of Attorney – The legal authorization of one person being able to act in behalf of another.
Preapproval – The process of evaluation a potential buyer goes through to decide how much money a loan can be given to them for.
Prepayment – Mortgage stipulation permitting the borrower to make additional payments before the maturation date.
Prepayment Penalty – Fee charged by a lender to a borrower when the borrower repays the a loan earlier than an agreed upon date.
Principal – On a loan, the total amount that remains unpaid by the borrower. On a monthly payment, the amount that goes towards the final paying of the loan.
PMI / Private Mortgage Insurance – Insurance that a buyer must pay for; required when a borrower does not provide a 20% down payment on purchase of a new property.
Rate Lock – Commitment given by a lending institution to a buyer that guarantees a certain interest rate is valid for closing for a specified period of time.
Real Estate Agent – A person that is licensed to negotiate the sale of property.
Recission – The cancellation of an agreement or contract; the law giving a homeowner 3 business days to cancel a loan arrangement. “Right of Recission”
Refinancing – The obtainment of a new replacement mortgage on a property that is already mortgaged.
Satisfaction of Mortgage – Document issued to a borrower on the occasion of their repayment of said loan.
Second Mortgage – The acquirement of an additional, subordinate mortgage on a property that is already mortgaged.
Servicing – All the work involved to keep a mortgage in good standing such as paying various tax, insurance, and other costs.
Shared Appreciation mortgage – A mortgage in which the buyer receives a property for less than current market value; in exchange, the seller is granted a portion of future property appreciation values.
Simple Interest – Interest calculated only on the balance owed.
Step Rate Mortgage – A loan in which the interest rate increases based on a set schedule until a set point, after which the rate remains constant.
Title – The document declaring a property’s ownership.
Title Insurance – Insurance policy that insures a potential home buyer or lender against errors in a title search.
Title Search – A legal examination of records to determine who is the rightful owner of a property.
Truth in Lending – Federal law that requires the lenders to disclose the APR to a buyer after applying for a loan.
Underwriting – The decision made by a lender on whether or not to provide a loan to a borrower based on their qualifications.
Friday 7 August 2009 @ 9:11 am
Steve Kyles asked:
For many Texas families looking for a first mortgage, the proposed mortgage rate can often be the one determining factor in whether or not the desired home is affordable. A low mortgage rate in this day and age is no longer a desire, it is a necessity. Low mortgage rates can make it possible for families to realize the dream of home ownership. With the cost of living increasing much faster than the standard rate of pay, a low mortgage rate means financial stability.
Finding a low mortgage rate in Texas starts with the mortgage loan officer. Low mortgage rates aren’t under every mortgage loan officer’s pillow, as some are bringing rates to the table which are nearly twice as high as other mortgage loan officers. What exactly is the difference? The higher the mortgage rate and the more the process costs you, the more business a mortgage loan officer is likely to earn if they are paid strictly on commission. Bad news for you can mean good news for the mortgage loan officer. Mortgage companies that offer their loan officers a fairer determining factor in their salary or commission are more likely to bring better offers to you.
Online loan officers seem like a really good idea. They try to make it simple for you. All you need to do is enter your information and Presto! You have mortgage offers flooding your email inbox, right? Sure, and not exactly. People with perfectly spotless credit may receive mostly fair and even a few low mortgage rates by doing it this way. But for truly low mortgage rates, the personal touch is still a requirement. Even people with nearly perfect credit don’t typically have spotless credit. Something as simple as a disputed charge or a $1 charge from a credit card company that you never knew about can ruin your chances of a low mortgage rate from an online source. Yet when dealing with credit scores, mortgage rates, and financial obligations, there is not real black and white formula which can spit out exactly what is available to you. Being able to talk face to face with mortgage loan officers makes a huge difference. For those who knowingly do not have perfect credit, which is most of us, there really is no other alternative than a real live in the flesh mortgage loan officer.
If your mortgage loan officer is truly searching for the lowest mortgage rate possible, they will gladly explain the process, how they came up with the low interest rate they are offering you, and why they can’t go any lower. Mortgage rates fluctuate nationally, and there are various low mortgage rate options available. Some people want to opt for fixed rates while others are looking for balloon payments. These things can not be adequately discussed with an online mortgage loan officer. Perhaps you believe you know exactly what you are looking for and why. A good and ethical mortgage loan officer can not only bring you a low mortgage rate, but they can help guide you in the process of deciding which type of mortgage is right for you. Often the mortgage loan officers have information that you don’t. Mortgage loan officers can often guide you in the best direction to save you money beyond a low mortgage rate.
Low mortgage rates are an imperative requirement for young families. While online mortgage loan officers find young families a high risk category, not all mortgage loan officers will. Some mortgage loan officers can find deals that simply blow the internet mortgage loan officers clear out of the water. This is exciting stuff when you think about it. Despite the fact that young families are not well established, they can still be an excellent risk for a low mortgage rate. Established families are typically a good risk as well, although some mortgage companies do not give them the credit, so to speak, which they deserve since they were renting properties for the first twenty years or so of marriage. These factors do help determine whether or not you will receive a low mortgage rate. It’s not necessarily fair, but it’s true.
When seeking low mortgage rates and the best mortgage package available for your personal circumstances with an online mortgage loan officer, there is no consideration given to your personal goals and desires for your future. Online mortgage loan officers can only determine a given set of information based on a predetermined formula, and none of it has anything to do with flexibility, probability, dreams, goals, wants, needs, or hopes. The right personal mortgage loan officer is able to sit down with individuals, couple, and families, and look at a larger picture and hear what the clients are hoping to attain for themselves and their families before making recommendations. There is more to a low mortgage rate than just a low mortgage rate.
All of the variable and all of the factors which go into finding the right mortgage package can only be well put together by finding the right mortgage loan officer. The right mortgage loan officer means different things to different people, but low mortgage rate always falls somewhere into the description. Knowing whether or not you are receiving a low mortgage rate depends on your circumstances, your credit rating, your income, your stability, and of course, the present market. You should walk into a mortgage loan officer’s office understanding what you think would be a low mortgage rate, and why. You should also remember that you may not have all of the information available to you to really determine what a low mortgage rate will mean for you.
For many Texas families looking for a first mortgage, the proposed mortgage rate can often be the one determining factor in whether or not the desired home is affordable. A low mortgage rate in this day and age is no longer a desire, it is a necessity. Low mortgage rates can make it possible for families to realize the dream of home ownership. With the cost of living increasing much faster than the standard rate of pay, a low mortgage rate means financial stability.
Finding a low mortgage rate in Texas starts with the mortgage loan officer. Low mortgage rates aren’t under every mortgage loan officer’s pillow, as some are bringing rates to the table which are nearly twice as high as other mortgage loan officers. What exactly is the difference? The higher the mortgage rate and the more the process costs you, the more business a mortgage loan officer is likely to earn if they are paid strictly on commission. Bad news for you can mean good news for the mortgage loan officer. Mortgage companies that offer their loan officers a fairer determining factor in their salary or commission are more likely to bring better offers to you.
Online loan officers seem like a really good idea. They try to make it simple for you. All you need to do is enter your information and Presto! You have mortgage offers flooding your email inbox, right? Sure, and not exactly. People with perfectly spotless credit may receive mostly fair and even a few low mortgage rates by doing it this way. But for truly low mortgage rates, the personal touch is still a requirement. Even people with nearly perfect credit don’t typically have spotless credit. Something as simple as a disputed charge or a $1 charge from a credit card company that you never knew about can ruin your chances of a low mortgage rate from an online source. Yet when dealing with credit scores, mortgage rates, and financial obligations, there is not real black and white formula which can spit out exactly what is available to you. Being able to talk face to face with mortgage loan officers makes a huge difference. For those who knowingly do not have perfect credit, which is most of us, there really is no other alternative than a real live in the flesh mortgage loan officer.
If your mortgage loan officer is truly searching for the lowest mortgage rate possible, they will gladly explain the process, how they came up with the low interest rate they are offering you, and why they can’t go any lower. Mortgage rates fluctuate nationally, and there are various low mortgage rate options available. Some people want to opt for fixed rates while others are looking for balloon payments. These things can not be adequately discussed with an online mortgage loan officer. Perhaps you believe you know exactly what you are looking for and why. A good and ethical mortgage loan officer can not only bring you a low mortgage rate, but they can help guide you in the process of deciding which type of mortgage is right for you. Often the mortgage loan officers have information that you don’t. Mortgage loan officers can often guide you in the best direction to save you money beyond a low mortgage rate.
Low mortgage rates are an imperative requirement for young families. While online mortgage loan officers find young families a high risk category, not all mortgage loan officers will. Some mortgage loan officers can find deals that simply blow the internet mortgage loan officers clear out of the water. This is exciting stuff when you think about it. Despite the fact that young families are not well established, they can still be an excellent risk for a low mortgage rate. Established families are typically a good risk as well, although some mortgage companies do not give them the credit, so to speak, which they deserve since they were renting properties for the first twenty years or so of marriage. These factors do help determine whether or not you will receive a low mortgage rate. It’s not necessarily fair, but it’s true.
When seeking low mortgage rates and the best mortgage package available for your personal circumstances with an online mortgage loan officer, there is no consideration given to your personal goals and desires for your future. Online mortgage loan officers can only determine a given set of information based on a predetermined formula, and none of it has anything to do with flexibility, probability, dreams, goals, wants, needs, or hopes. The right personal mortgage loan officer is able to sit down with individuals, couple, and families, and look at a larger picture and hear what the clients are hoping to attain for themselves and their families before making recommendations. There is more to a low mortgage rate than just a low mortgage rate.
All of the variable and all of the factors which go into finding the right mortgage package can only be well put together by finding the right mortgage loan officer. The right mortgage loan officer means different things to different people, but low mortgage rate always falls somewhere into the description. Knowing whether or not you are receiving a low mortgage rate depends on your circumstances, your credit rating, your income, your stability, and of course, the present market. You should walk into a mortgage loan officer’s office understanding what you think would be a low mortgage rate, and why. You should also remember that you may not have all of the information available to you to really determine what a low mortgage rate will mean for you.
