Mortgage Overview

 

What is a mortgage?

A mortgage is a loan used to purchase or refinance a home or property. The real property is pledged as collateral for the mortgage. The borrower agrees to repay the loan in monthly installments over a pre-determined period of time.

 

Can I qualify for a home loan?

To qualify for a mortgage, the credit history, income, employment and assets of a potential borrower must meet the guidelines established by the lender. The property under consideration must also qualify for the loan by meeting the lender’s specific standards.

 

How is the loan repaid?

A traditional 15 or 30 year fixed rate mortgage loan is made up of two components, called “principal and interest.” (We’ll discuss taxes and homeowners insurance later.)

“Principal” is the portion of the payment used to repay the original loan amount. “Interest” is the second part of each payment, paid in exchange for the opportunity to borrow money to purchase the property.

As the principal segment of each payment reduces the original loan balance, the amount paid toward interest decreases month by month. This is called “amortization.”

 

Mortgage programs

Many types of mortgages are available, designed to accommodate individual budgets, down payments, monthly incomes, qualifications and age groups. For instance:

 

• Conventional, fixed-rate loans offer consistency and stability
• Adjustable rate mortgages, called “ARMs,” offer diverse repayment schedules
• Government-insured FHA and VA loans offer flexible qualifying guidelines
• FHA’s Reverse mortgage is specifically for seniors aged 62 and older

 

It is extremely important that you have a complete understanding of a loan’s terms and repayment responsibilities before you decide which to choose. Your Mortgage Professional will explain your options and assist you in determining the right loan for you and your family.

 

Costs involved in obtaining a mortgage loan

The actual cost of acquiring a mortgage may be determined by the borrower’s decision to pay additional money, called “points,” to purchase a lower interest rate. Other elements affect the final cost, such as underwriting and loan processing fees that may be applied for the work involved in completing the transaction.

Several federal policies have been implemented to protect the rights and interest of borrowers. These regulations ensure that every potential homebuyer is aware of all their options during the process to apply for and secure a home loan.

Be aware that you may need to budget for additional real estate transaction-related costs not directly associated with the mortgage, such as:

• An appraisal
• Home inspections
• Homeowner’s Association dues
• Property taxes
• Homeowner’s insurance

 

Your Mortgage Professional is prepared to fully explain the long and short-term benefits of various loan programs. We are here to educate, advise and guide you through the process of obtaining a home loan. Call us today!

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