Does the thought of buying your own home give you the uncomfortable sensation that due to absence of adequate useful home mortgage information in hand you might be tricked into entering into a bad mortgage deal not suitable to your requirements? Instances of failure to enter into a good home mortgage deal by the home buyers are not rare. Five years ago when I was in search of buying a house of my own, I contacted my bank and requested a home loan and I eventually could settle for one. But soon I could figure out that the offer settled by me wasn't a good one and I could have bargained for a much better mortgage rate and made huge savings in my interest shell out had I been little conversant with the useful home mortgage information, the mortgage process and the related subjects.
When you contemplate home loan mortgage, which is assisting scores of people every year to get dwellings for them, you may be longing for a Mortgage Broker who would arrange a good home mortgage deal for you from the loan providers that suits your requirements making certain that you would be in a position to pay for the same. While you go for such mortgages, my realization is it would be easier for you to crack the best offer, if you are equipped with all the useful home mortgage information including acquaintance with the different terminologies used in home loan lending business. It is in this particular context, here are some of the most commonly used terminologies connected with the home mortgage business and the key dos as well as don'ts one needs to remember to exercise a good home mortgage deal.
Key Terms.
Mortgage Loan : Mortgage loan is a loan, which utilizes real estate because security or collateral against borrower's possible defaults on the terms of loan. The mortgage is the deed of agreement from the borrower with the lender to help pledge his home or other real estate as security.
Large financial company : Mortgage broker acts as an agent to sell mortgage products/loans on behalf of financial institutions/lending companies. Amortgage broker need not be restricted to one company only and may sell products of different businesses. Since a mortgage broker offers association with different lending institutions, they can give valuable guidance to help you get the best deal that suits your needs.
Primary Amount : Principal amount could be the total amount one borrows on which the applicable rate of interest is charged annually. The actual equated monthly instalment with regard to repayment of the homeloan would include a part of this principal amount in addition to the interest instalment. Thus, with each repayment instalment the principal amount will get reduced every month.
Rates of interest : Interest Rate is the cost you pay for the borrowed money. This particular home loan rate may be fixed or floating/adjustable. The fixed rate of interest normally remains unchanged throughout the term of the loan. Nevertheless, such interest rates offered by lenders may vary from company to company, although marginally, yet may result in substantial savings for the customer in the amount of interest payout over the years. Therefore, while shopping for a set interest mortgage home loan such small difference in rate should be given prime-importance in choosing the lending company. However, sometimes such fixed interest rates are also adjustable after a particular period of time and hence it is better to pay off this point with your lender beforehand.
In case of floating or adjustable interest rate, the rate of interest is linked to an index that changes according to the market problems. Since the rate is dependent on the market forces there is no guarantee when this rate will go high or even low.
Amortization: A repayment method in which the borrowed amount along with interest is repaid gradually through regular monthly instalments. During the initial few years, most part of each hit payment covers the amount of interest owed. During the final years the loan repayment amounts almost exclusively represent the remaining principal.
Closing Costs : Closing costs are the levy-able costs and fees associated with processing of the house loan, which are to be bourn through the borrower for availing the loan. Normally, closing costs include build up for taxes, fee in the direction of origination of the loan, examination related fees, legal fees, underwriting charges etc.
Down Payment : The down payment relating to home loan mortgage is understood to be the difference between the total loan amount and the price to be compensated to the seller of the home. This particular down payment normally ranges from 5 to 15 percent from the selling price of the home. Most of the loan companies require that the down payment is made by the borrower from their own funds. The Mortgage Broker doesn't have role to play in the down payment amount involved in the transaction.
Good Faith Estimate : Very good faith estimate (GFE) is a document to be provided by the lending company to its customer i.at the. the borrower which would include an estimate of the closing costs i.e. the itemized fees and charges related to processing of the mortgage loan deal. This document will have to be provided by the lending company to the borrower within three days of application for that loan. However, GFE becoming merely an estimate, the actual expenses may vary.
Grace Period : The timeframe during which a loan repayment may be made after the due date with out incurring any penalty. However, such late payments may be reflected in your credit reports.
Non-Prime Loan : Non-prime, sub-prime or near-prime loans are high-risk loans and are meant for those having poor credit history. This type of home loan is non-traditional and hence extremely risky.
Apart from acquainting yourself with all the over important and frequently used terms related to the mortgage lending business, it is essential to keep yourself conversant with all the related useful home mortgae information, which include the following essential points for working out a good home mortgage deal:
Avail the services of a reliable Mortgage Broker who would offer the right type of mortgage deal for you personally, which would not only suit your needs but would also be affordable by you;
Do not approach the Large financial company with feeling of fear or even mistrust. Your relationship together with your broker should be open. Remember that almost all the brokers in the home loan business actually want to help you in getting the right loan for you and not to sell problems for you;
Once you have found a house that you have chose to purchase try to negotiate the best deal with the help of information you have gathered. The first thing in the process is to find out the fair value of the house with the help of your Agent who has accessibility information that you need;
Ensure that the title of the property is clear and there are no competing claims on the property;
Be sure to make evaluations of the sources of mortgage funds available in the market. Examine the merits and demerits of different products such as the applicable home mortgageloan rates of interest prior to finalising a mortgage deal. Going for a deal without comparing the mortgage funds could cost you thousands of dollars over the term of the mortgage;
Get yourself pre-approved for thehome loan,which would greatly minimise the hassles of approval procedures for the mortgage. For this it would merely require filling up of few simple forms and providing the particulars like your age proof, earnings data, credit history, marital status in case of co-borrowing with your partner etc;
In order to improve your credit history and get the loan pre-approved without any problem it is important to reduce or eliminate your own unsecured debts, if any;
The lenders have customized various kinds of loans to suit their different types of customers based on EMI repayment schedule. Choose the one that suits you best according to your repayment capacity;
Restrict your loan amount to a level which you can afford to repay. If you have a co-applicant, your combined income will be considered and the loan amount may be elevated;
Ensure regular and timely re-payment of the due Equated Month-to-month Instalments (EMI) to avoid attracting late payment charges, penal interest charges etc;
Get an concept of the tentative amount you'll be required to pay every month by using the EMI calculators available on leading mortgage providers' websites;
Be ready to incur the extra cash expenditure towards the settlement costs associated with processing of the mortgage;
The formal closing of the home mortgage deal is your final event to make sure that everything related to purchasing the house has been done correctly. Consequently, arrange for an experienced closing agent or attorney to create final preparations for shutting and settlement of the deal
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