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Mortgage - Home Loans - Refinance - Mortgage Refinance - Mortgage Rates - Home Equity
Home Loans - The Basics
A standard mortgage is the way most people buy a house. With long term financing mortgage loans
can allow families to own a home for about the same monthly payment as
rent. Typical home mortgages run fifteen to thirty years although
shorter and longer terms are available.
Such a loan usually requires a down payment
of twenty percent. If the borrower cannot come up with that much down
payment, there are other options such as Private Mortgage Insurance
(PMI). In this case the borrower might only put down five percent yet
provide the lender with the assurance that the loan can be repaid if
the borrower defaults. Typically such insurance will add one half a
percent (based on the initial cost of the home) to the total interest
rate on the home.
Owning A Home vs. Renting
While
owning a home is the American dream, it comes with responsibilities.
Renters who buy a home for the first time may not be used to the
maintenance required, since the rental property landlord was obligated
to do that in the past. In addition to home repairs, home owners need
to pay insurance (usually homeowners insurance and flood or earthquake insurance) plus property taxes. All of these expenses should be factored in when considering a mortgage.
Mortgage Rates and How They Are Determined
There
are several ways that interest can be charged with a mortgage. The
interest rate can be fixed for the period of the loan or it can be
adjustable (ARM). An adjustable rate will go down when interest rates
go down and go up when interest rates go up. These are usually based on
an index that will be specified by the lender, such as the interest
rate for US treasury bills.
In addition the time period during which adjustments can be made can
vary. The consumer should understand exactly how payments can vary
under an adjustable rate mortgage and realize that payments could increase considerably.
In
addition to the interest rates lenders often charge points and there
may be substantial closing costs which are paid by the borrower.
These should always be calculated together to obtain a true interest rate which will vary from the stated interest rate.
Shopping
for the best rate with a home mortgage company is well worth the time,
since the loan is for a large amount of money, often more than one
hundred or two hundred thousand dollars and the loan is long term.
Just a half point drop in interest can make a big difference in the
monthly payments required. Also lenders who charge fewer points are,
in effect, giving the consumer a lower interest rate. For example, a
half percentage difference can cost about $35 more per month on a
home loan of $100,000 for thirty years or more than $400 per year or a
total of $12,000 over the term of the loan.
Closing The Mortgage Loan and Paper Work
After
being approved for a loan, a home purchase still requires a lot of
paper work known as closing costs. These include a title search to
make sure that the seller has a clear title
to the property and that there are no liens on the home, an
appraisal may be required, and a credit check of the borrower will
usually be required. After the sale and transfer of the title, the
title must be recorded usually at the registrar of deeds at the county
courthouse.
Home Loans, Attorney Protection & Loan Modification
Mortgage - Home Loans - Refinance - Mortgage Refinance - Mortgage Rates - Home Equity
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