Mortgage Basics
If you are looking for the mortgage that best suits your needs, consider yourself not alone. There are millions of others just like you searching for the best mortgage rates every year. Many people dream of owning a home but due to high costs, a mortgage is usually required to make that dream a reality. It is important to learn mortgage basics and not only know, but also understand your options. Surprisingly, not everyone puts forth the time and effort necessary in researching these options. This is important since mortgage rates vary from company to company. It is in your best interest to get as many quotes as possible so you can make a qualified decision. You can find home loans through banks, credit unions, savings and loan, insurance companies and mortgage bankers. A mortgage is basically using your property as collateral and giving it to a lender to hold as security for your payment towards the debt. If you don’t make your payments, the lender can take your home from you to cover them. The loan principal is the actual amount you borrow to purchase a home. The bank charges you an amount, this is the interest. They base their interest rate on recent economic indicators. If you do a good amount of research and educate yourself on the different types of loans available, this will be very helpful in the decision making process. Be aware of certain lenders, who will try to take advantage of innocent and unprepared consumers. With an adjustable-rate mortgage (ARM) you will receive a low interest rate early on and pay less for short-term ownership of your property. Your other option is a fixed-rate mortgage (FRM) that maintains a constant higher rate. If you think you will stay in your home for over five years then the predictable loan, a fixed-rate mortgage, might be your best choice. As opposed to going with the ARM and paying a lower interest rate initially, then having it adjust to something much higher. Since loans are usually for high amounts, they can be anywhere from fifteen to thirty years. The amount of time for the loan is called the term. Finally, your loan goes through the process of amortization. This is when your total is divided equally into payments over the life of your loan. Your payments will typically go toward paying the interest in the loan early on, and towards principal later in the term of the loan. The Fair Housing Act (FHA) and the Equal Credit Opportunity Act (ECOA) are set in place to protect against any discrimination towards consumers. This applies to mortgages for refinancing, purchases or home improvements. Under the ECOA you have many rights. You will not be denied a credit transaction based upon your race, ethnicity, religion, national origin, sex, marital status, age or income received from any type of public assistance program. Under the FHA you will not be discriminated during any residential real-estate transaction. This applies to loans for purchasing or repairing property. Selling, brokering or the appraisal toward residential real estate discrimination is prohibited, also transactions for selling or renting property. It also prohibits any discrimination towards race, color, national origin, sex, religion, household status or handicaps. Knowing the basics of mortgage means understanding certain lenders and their “dos and don’ts.” Lenders need to consider public assistance the same as they would any other source of income. Also, taking into consideration the income received from Social Security, part-time employment, pensions and annuities. Alimony and child support also need to be counted as income. In the event of a co-signer, it is a good idea to accept someone besides your spouse. If you own the property together, he or she might be asked to sign documentation allowing the property to be mortgaged. Lenders cannot use your race, national origin or sex against you while considering your application. They cannot impose different terms or conditions, like a higher interest rate or larger down payment based up them either. Yes it is voluntary when filling out the application to disclose this information, but this helps federal agencies to better enforce their anti-discrimination laws. You cannot be discouraged from applying for a mortgage based upon those factors. Lenders do not have the right to ask you about any future plans of a family, but can question any expenses regarding current dependents. After you have figured out what mortgage is right for you, make the comparison between lenders. Get a sense of the market through the real estate sections of newspapers and use the Internet to search mortgage websites. Keep in mind private sources for your mortgage. Parents, relatives, friends, possibly the seller of the house you are interested in. This is the most cost effective mortgage, borrowing from others. This is becoming quite popular with investors who turn their real estate into high-appreciation places to put their money.