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Mortgage Information

WHAT IS A MORTGAGE?

A loan that is secured by property or real estate is called a mortgage.

In exchange for funds received by the homebuyer to buy property or a home, a lender gets the promise of that buyer to pay back the funds within certain duration for a certain cost. The mortgage is legally binding and secures the note in giving the lender the right to have legal claim against the borrower’s home if the borrower defaults on the terms of the note.

Basically, the borrower has the possession of the property or the home, but the lender is the one who owns it until it is completely paid off.

 

Conventional Mortgages

Usually conventional mortgages are not insured or subsidized by the government. Most lenders require a down payment of at least 20% on a conventional loan but offer them with lower 5%-10% down payments if the buyer purchases private mortgage insurance (PMI). PMI protects the lender if the home owner defaults on the mortgage.

Conventional mortgage loans are generally fully amortizing. This means that the regular principal and interest payment will pay off the loan in the number of payments stipulated on the note.

Most conventional mortgages have time frames of 15 to 30 years and may be either fixed rate or adjustable loan. While most mortgages require monthly payments of principal and interest, some offer bi-weekly payment options.

Home buyers who can afford the higher monthly payment sometimes prefer a 15 year conventional mortgage over a 30 year mortgage. Interest rates on 15 year mortgages usually are a little lower than 30 year rates. In addition, a home buyer financing a home purchase with a 15 year mortgage will repay principal much faster and will pay far less interest over the life of the loan.

 

The 30 Year Fixed Rate Mortgage

With a 30 year fixed rate mortgage, the home buyer pays off the principal and interest on the loan in 360 equal monthly payments. The monthly payment for principal and interest remains the same during the full loan period.

 

The 15 Year Fixed Rate Mortgage

The 15 year fixed rate mortgage is paid off in 180 equal monthly payments over a 15 year-period. A 15 year mortgage typically requires larger monthly payments than a 30 year loan and allows an individual to pay off a mortgage in half the time as well as save on interest. The buyer can save thousands of dollars on interest charges by using the 15 year mortgage. Fifteen-year mortgages typically carry interest rates a little lower than those for 30 year loans.

 

Jumbo Mortgages

Jumbo mortgages are home loans that exceed conforming loan limits imposed by Fannie Mae and Freddie Mac, the two government-sponsored enterprises that buy mortgages from lenders. In most (but not all) U.S. counties, any mortgage of more than $417,000 is a jumbo loan — and jumbo mortgages have higher interest rates than smaller loans. In about 200 counties with high home prices, borrowers are able to get mortgages for up to $625,500 without paying the higher jumbo interest rates.

 

Federal Housing Administration (FHA)

FHA (Federal Housing Administration) loans are popular with first-time home buyers. The best advantages of a FHA loan over conventional loans are the low cash needed at closing. Most first-time home buyers do not have the funds available to put 20 percent down plus pay closing costs. The FHA requires only 3.5 percent of the loan value to be paid at closing. Some of these funds can come from a gift from a family member also. FHA loans have very competitive rates. This will equate to a lower payment every month. By having a lower interest rate, you will pay much less over the life of the loan. The FHA often offers lower rates than a traditional 30-year fixed loan.

 

VA Mortgages

If you are a veteran or active duty military personnel, you might be able to obtain a mortgage guaranteed by the Department of Veterans Affairs (VA). VA guaranteed loans require no down payment.

 

Understanding APR

One of the most important terms you will come across when shopping for a mortgage is APR, or annual percentage rate. But what exactly does it mean?

Simply put, APR is a way of indicating the real cost of a mortgage, expressed as an interest rate. While the regular interest rate is the first thing most people look at when pricing a mortgage, the APR also takes into account the closing costs and other fees that are built into a loan.

When you take out a home loan of any sort, whether you are buying a home, refinancing a mortgage or taking out a home equity loan, the interest rate is not necessarily a good indication of what you are paying for the loan. Many lenders will offer low “teaser” rates to draw borrowers’ attention but add in so many additional fees that it will ends up costing more than a loan with a higher interest rate but fewer fees.

 

Discount Points

Discount points are a way of buying a lower interest rate by pre-paying some interest at the time of closing. Buying points can make financial sense if you have the mortgage for a long time but aren’t such a good deal if you sell the home or refinance within a few years.

In general, a mortgage with higher fees but a lower interest rate becomes more attractive the longer you have the loan, because you have more time for the savings from the lower rate to accumulate.

 

Please contact Realty Expertise for further details about Mortgage Information via;
Phone: 702.373.7565 or Email: vherzog@realtyexpertise.com

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Realty Expertise assumes no responsibility nor guarantees the accuracy of this information. Realty Expertise does not guarantee your lender will change the terms of your mortgage. Realty Expertise and their associates are not attorneys;  Realty Expertise is not engaged in the practice of law nor gives any legal advice. Realty Expertise strongly recommends that you seek the appropriate Professional counsel regarding your legal rights as a homeowner.

Realty Expertise is not associated with the United States government, mortgage lenders or any banking institutions. By accepting this offer and using the services of Realty Expertise, your lender may still not agree to change your loan.

IMPORTANT DISCLOSURE: Clients of Realty Expertise are never charged any fees associated with the short sale process.

You have the right to reject or accept any offer Realty Expertise obtains from your lender (servicer) of your loan.

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