Ross Bainbridge asked:




A mortgage is a device for a lien between a lender and a borrower. Through a mortgage, the borrower pledges the property to the lending agency as a security. This way the loan is secure and the lender can foreclose the property and recover his loan if the borrower fails to make mortgage repayments. A mortgage lien comprises the actual mortgage and a note that registers this lien. This process is also called hypothecation.

Mortgage loans in California, as in other parts of the country, are essentially of two kinds: fixed-rate loans or adjustable rate loans. A fixed rate loan is called an Amortized rate Mortgage (ARM) where the interest rate on the mortgage is agreed to and fixed for the entire period of the mortgage. In an ARM, the lender assumes the risk of interest rate fluctuation. This means that if the market rates go down the lender benefits from it but if they go up, the lender has to continue to charge only the fixed rate.

Adjustable rate mortgages have variable interest rates that can vary monthly or annually. In these loans the interest rate risk is transferred to the borrower. Therefore, loan rates of adjustable loans are also marginally lower than existing market rates. Many California homeowners also capitalize on the equity of their home by applying for a second mortgage on their homes.

Typically, most homebuyers apply for a pre-approval to loans. Through this process, the lending agency judges the loan repayment capacity of the borrower by their credit ratings, equity, income, etc. Once the loan is pre-approved, the borrower can easily enter into a mortgage lien with the lender once he actually locates a house.

Last but not least, a home mortgage loan with no down payment on the house is a popular option that many homebuyers opt for. This allows them to own a home and yet not invest all their savings into buying it.

Betty

Jim Johnson asked:


For most people the mortgage industry seems to speak a foreign language, with terms and acronyms that are vague and unfamiliar. And of course, when dealing with large sums of money such as those found in a home mortgage, you want to try to understand the language as much as possible in order to avoid making mistakes. So here is a little primer on some of the most important terms used when getting a mortgage or home loan.

There are four types of mortgages that are generally available and those are fixed rate, adjustable rate, convertible and special loans.

Fixed Rate Loans – usually these are found in either the 30 year loan or 15 year loan category, and this simply means that you pay a fixed payment each month over the course of either the 30 years or 15 years.

Adjustable Rate Loans – this is where your payment can fluctuate depending on the prevailing interest rate at the time. If interest rates rise, then your payment goes up and if interest rates fall, your payment goes down instead.

Convertible Loans – these are loans that may start out as either a fixed rate or an adjustable rate mortgage, and then can be converted over to the opposite kind of loan instead. Many people will use this type of loan to start out as an adjustable rate mortgage and then convert over to a fixed rate mortgage when interest rates are at their lowest.

Special Loans – these include FHA loans for first-time homebuyers and folks with credit problems, and also VA mortgage loans for veterans of the Armed Forces and their families.

There are other terms that you need to know when it comes to getting a home mortgage as well and they are:

Appraisal – this is where you pay an independent person to correctly assess the value of your home using excepted market calculations.

Closing costs – these are fees that are usually payable when the mortgage papers are signed that pays for the transfer of the ownership of the home.

Points – this is a value that typically relates to 1% of the total cost of the home being mortgaged.

Escrow – this is where money is often held by a neutral third party in a transaction of two or more people.

Pre-qualify – this is where a lending institution will state that you do qualify for receiving a home mortgage for a certain price range of home.

Pre-approval – this is where a lending institution has already run the necessary paperwork and approved a home mortgage loan for a certain amount.

There are other special terms and acronyms used by the mortgage industry, but the ones listed above are perhaps the ones that are most commonly used. Hopefully this will help you be more informed when you try to get your next home mortgage loan.



FORREST

Lender411 asked:


If you thought finding just the right home was an important decision, you are thinking of only half the transaction! As a matter of fact, while the right home is a crucial aspect of any real estate transaction, finding the right home loan with which to finance it is just as essential. Pick the wrong loan, and you may find that in a few short years your dream home will no longer be affordable; pick the right loan, and the payments will be easier to keep up with!

In the most basic terms, a home loan is little more than the amounts of money you need to borrow from a lender in order to buy the home you have picked out. It is typically the difference between what the house costs minus the down payment funds you have sitting in your bank account. Usually the loan amount is a pretty hefty chunk of money, and borrowers need to think through the terms they foresee being able to afford not just in the short term, but also in the long run. Since loan terms are generally measured by decades, it is of the utmost importance that you think very carefully before shopping around for a loan product.

The first question that more often than not needs to be answered is whether you want to apply for a fixed rate mortgage or instead opt for an adjustable rate loan (commonly abbreviated as ARM). Fixed rate loans are conservative in their risk; the interest rate never changes and the payment will remain consistent throughout the life of the loan. Adjustable rate loans start off with a much lower interest rate, but over the term of the loan the interest rate gradually creeps up and before long it might surpass the interest rates charged on fixed rate loans.

Fixed rate loans are perfect for borrowers who want payment predictability they can bank on. The interest will never adjust upward – even if the economy changes drastically – and the payment is the same over the life of the loan. This makes budgeting a lot more realistic. Since banks are the ones who are taking the risk for issuing loans at interest rates that may be surpassed any time soon by the economy, they usually charge slightly higher rates than they would for adjustable rate mortgages. Future homeowners who are looking for a long term home and do not foresee moving any time soon will do well to give these loans a good look.

Adjustable rate mortgages are for the homeowner who is somewhat of a gambler at heart or who is not thinking long term when purchasing a home. For those anticipating to only keep their home for three, five or seven years, an adjustable rate mortgage that offers a lower interest rate during that period of time might be a great way to accomplish homeownership and save money on the loan product. It becomes problematic if you change your mind midstream and decide to keep the home but the loan continues to adjust upward with respect to the interest rate. The uncertainty about the changing interest rates and payments makes it harder to budget.

An amazing but risky third option that seems to combine aspects from both a fixed loan and an adjustable rate mortgage is the balloon loan. These loans are dicey but could save you a lot of money. Initially the balloon loan will have a very low interest rate – much like an adjustable rate mortgage – but it will remain steady and unchanged, like a fixed rate mortgage. After a predetermined period of time, commonly seven to 10 years, you are required to pay off the entire outstanding balance which is a huge sum. Although you could refinance your home at that time, it is essential to remember that you need to qualify for the refinance loan in the first place! Since economic climates are subject to change, there is no guarantee that this process will be as easy in seven to 10 years as it is today. You can find out about these and mortgage and refinance rates on our site www.lender411.com.



DOMINGO