A fixed rate mortgage is a mortgage with an interest rate that never changes over the term of the loan. Most fixed rate mortgages are available in either 15, 20, or 30 year terms. Fixed rate mortgages are preferred during periods of high interest rate, because they offer consumers a steady, reliable interest rate and a mortgage payment that won't change over the life of the loan.
Adjustable Rate Mortgages:
Adjustable rate mortgages (referred to as ARMs) offer a variable interest rate that tracks with the national prime interest rate. ARMs are attractive because their initial interest is lower than traditional rates and the initial monthly payment tends to be lower than a fixed rate loan. The time period with the fixed interest rate is always specified at the onset of the loan. When the initial period is concluded, the interest rate and the monthly payment changes according to market conditions ? if the national rate goes up, the interest rate on the loan increases. How often the interest rate adjust is part of the terms of the loan.
ARMs are great for buyers that aren't planning to stay in the home for a long period of time.
Government Loans:
There are a number of government programs that make it easy for individuals to qualify for mortgage loans. These programs include:
FHA Loan ? an FHA loan is insured by the Federal Housing Administration and is available to all qualified home buyers. FHA loans offer low down payments and usually cover moderately priced homes. There are limits to the total amount of the loan.
VA Loan ? a VA loan also offers a low or no down payment to qualified military veterans. The veteran must obtain a certificate of eligibility from the Department of Veterans Affairs.
You'll find that there are a number of options for loans under each category of loan. For instance, you can find fixed rate loans that have an option for a minimum down payment or sometimes, even no down payment.
Your best option is to consider the types of loans and discuss them carefully with a mortgage loan officer. You'll find that a great loan officer can show you a number of programs that you can qualify for, all with the goal of finding the best loan for you.
In the mortgage industry, there are some common terms for the mortgage process. You may find these terms unfamiliar. Rather than just wondering what these terms mean, and more importantly, what they entail, we will help you negotiate the mortgage process through its lifecycle.
The first step of the process is the Application. In this phase there are several things that happen. The mortgage consultant takes basic information needed for granting a loan from you. The consultant also works with you to find the appropriate loan program. In this phase, you will receive all the details of the mortgage program including the costs and expenses. This is referred to as a Good Faith Estimate. During this phase, many consultants will run a cursory credit check to see your ability to repay the loan, this process is called pre-qualification.
The next step in the process is Loan Processing. With loan processing, the lender collects and verifies the information from the borrower and also the real estate property. This step involves checking your credit history, verifying your employment history, verifying banking information and details about the property. During this stage, you will provide the mortgage consultant with lots of paperwork; copies of your pay stubs, bank records, etc.
During this stage, the mortgage company verifies all the information, performs ratio analysis, appraisals of the property, etc. In the loan processing phase, the consultant gets the file in order with all the necessary paperwork. The loan file will be passed on next to underwriting.
In the next phase, Underwriting, the mortgage application is scrutinized to see if the loan would be a good risk to the lender. The loan application is reviewed in terms of the borrower, the property, and any conditions attached to the property. All must be consistent with the lender, and the specific mortgage programs, standards. It is in this stage that the decision to approve the mortgage is made and in this stage an approval and commitment letter is issued.
You are almost at the end of the mortgage process. The next to last stage is Loan Closing. In this stage the loan closer contacts the title company to make sure the property can be sold as is. At this phase, you will have to provide proof of proper insurance. All the files are double checked for accuracy, and any disclosures are provided to you. At this point, you sign off on all the documents (and there are a lot) and the loan is disbursed to you (you are responsible for repayment) and the money is transferred to the seller to complete the legal conditions of the sale. The mortgage is officially recorded in the public record. The loan will generally be reviewed as part of an auditing process to make sure the loan is complete, but as of now, you own the home.
The final stage is called Loan Servicing. This refers to the management of repayment of your loan. The company that services your loan sends you repayment coupons, tax statements, manages your escrow account, and collects and releases funds for taxes and insurance. The company or lender that services the loan is who you call if you have any questions or concerns.
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