Mortgage News | Refinancing Articles

Getting a first home mortgage can be stressful and nerve-wracking, especially if you need to deal with legalese. The knowledge that one wrong interpretation of the word can cause you undue problems contributes to the anxiety of getting a home loan mortgage.
The following are some mortgage-related words and their definitions to help borrowers understand the process, terms and conditions before they apply for a loan.

• Down payment – is a portion or percentage of the total sale price of the property that buyers should pay in cash.
• Mortgage insurance – A type of insurance that protects home loan lenders from financial loss in the event that borrowers default on their home mortgage payments. The insurance is required by lenders if the borrower’s down payment is less than one fifth of the total purchase price.
• Credit report – This is a summary of the borrower’s credit history which helps lenders to determine if he is creditworthy.
• Adjustable-rate mortgage (ARM) – This type of mortgage does not have a fix interest rate. Both ARM and hybrid mortgage are popular when interest rate is higher in the home mortgage market.
• Negative amortization –means an increase in the principal loan balance caused by payments that fail to cover the interest owed. The unpaid interest due will be included in the principal balance which makes it harder for a borrower to pay off his loan despite paying on time.
• Prequalification letter – This is a letter from a home mortgage lender informing that a borrower is eligible to receive a mortgage. On the other, a preapproval letter states that documents submitted by the borrower have been verified and a professional estimation of the property will follow.
• Impound account or lender’s escrow – An additional money paid by the borrower every month for his property taxes and hazard insurance premiums.
• Principal, interest, taxes and insurance (PITI) – are components of a monthly mortgage payment.

Are you looking for a house to buy? Are you planning to approach a home mortgage lender to finance your home purchase? Here are three things that you should avoid when taking out a home loan mortgage to buy that dream home of yours.

1. Don’t develop a fatal attraction to a home

Do not be too transparent and expressive about your feelings when looking at houses presented by realtors. Some realtors use your own expressions of awe to create their own spiels so that you become attached to a certain house after seeing only a few houses.

Be on guard about choosing a higher-priced home just because you saw some part of the house you have become attracted to even if that part is not essential to family living.

Always remember that realtors have been trained by their managers and have been sharpened by their experiences, making them experts in persuading you to become attached to a house they have been wanting to sell.

2. Don’t ignore programs for new homebuyers

There are a lot of home ownership programs offered by federal and local agencies exclusively to first-time homeowners. These programs feature grants, low down payments, special low-interest loans, bonuses and first home buyer mortgage options that facilitate home ownership.

Spend time browsing the site of the Federal Housing Authority and the sites of local housing agencies and look for programs that best fit your qualifications and that offer the most benefits. The FHA home mortgage program for first-time homeowners offers down payments lower than comparable commercial home mortgages.

3. Don’t forget closing costs

Most new homebuyers consider only the down payment for the home mortgage when sorting out their finances. You should consider closing costs, which can add up to an amount much larger than you thought. These include fees for home inspection, appraisal, home insurance, land survey, land transfer, home warranty and home mortgage insurance.

Applying for home mortgage entails requirements that have to be met by a borrower. One of the most important requirements is a good and well-established credit record. It is one determinant of the possible interest rate of a home mortgage. An unimpressive credit history may deem a higher rate, while a reputable credit may mean low home mortgage interest.

It is, therefore, very necessary for a person to protect his credit. With the numerous fraud tactics that criminals perform, one can never be so sure.

A prevailing type of theft right now is credit fraud, otherwise known as identity theft. It particularly targets credit accounts of victims. As the name implies, the identity of a victim is stolen them so that it can be used to charge credits to the poor victim. Without making any purchase at all, the victim suffers from the debts while the criminal enjoys the benefits. Even worse, the victim is left with the burden of clearing up their damaged credit record.

Hence, it is highly advised that credit holders be very careful about their personal and credit information. All identification numbers, the Social Security Number for instance, must be handled with utmost confidentiality.

In case of theft, the victim must instantly report the incident to the police and get a police report. This report shall be given out to the banks, credit card companies, and other financial institutions where the victim is affiliated. Also, immediately close old accounts.

After clearing up their credit record, the victim must monitor credit report from time to time to make sure that no illegal transaction has taken place.

Acquiring a low-interest home mortgage requires a little more work on the part of the borrower. They may not be always directly linked to home mortgage loan applications but most definitely, efforts to maintain a well-protected, well-established credit record pays off.

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