The Rosetta Stone of Home Loan Terms
Whether applying for your first loan, second or refinancing, the mortgage application process can be overwhelming. Understanding the language of mortgages is a first step to understanding it.
A deed-in-lieu is a subject you really want to avoid, but it is coming up more and more. When a borrower is about to be foreclosed on, a lender will sometime take this deed. The borrower loses the home, but avoids the cost of foreclosure.
If you are cash rich at the closing, you might want to investigate paying a discount point. It is the equivalent of one percent of the loan amount. By paying it, you can pay down the interest rate on the loan and save money over time.
As a buyer, you are going to be asked to put down an earnest money deposit. This essentially tells the seller you are serious about the purchase. The deposit then becomes part of the down payment when closing occurs. Make sure to notify the lender of the amount.
With rising energy prices and global warming concerns, the government is offering energy related mortgages. The Energy Efficient Mortgage is an FHA program that provides money to make your home energy efficient and has low borrowing costs.
If you get into trouble trying to pay your mortgage, it is important to understand a lender does not want to foreclose. If you communicate with them, they will often give you a special forbearance that lowers or eliminates payments for a period of months.
There are a number of quasi-government lenders. Fannie-Mae is one. It does not lend to the public directly, but guarantees loans made by lenders to certain types of lenders, often first time buyers or low-income borrowers.
Lenders evaluate potential borrowers in many different ways. The loan-to-value ratio is one of them. It is the requested loan amount divided by the appraised value of the property.
Timing is a big issue in the world of mortgages. Specifically, rates change on a daily basis. To avoid this problem, you want to ?lock in? your interest rate when a lender approves you. The cost is usually a few hundred dollars.
In evaluating the merits of a borrower, lenders look to many different aspects of your financial profile. The ?debt-to-income ratio? is one. It represents your total house expenses compared to your income.
Visiting a country where you don?t understand a word being said can make you feel bashful and intimidated. The same goes with dealing with lenders. This can lead to unfavorable loans. Take the time to learn the lingo, and you can avoid such problems.
Get more information on mortgage loans at FSBOAmerica.org.
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