Mortgage Information

Mortgage Financing Terms:

1. Alternative Financing: Mortgage instruments for both new and existing homes allow the buyer to qualify at a lower-than-market rate. Among these instruments are adjustable rate mortgages, graduated payment mortgages and buydown mortgages.

2. Assumable loans: A loan that can be picked up by a subsequent buyer for a small assumption fee. It saves thousands of dollars in closing costs and loan origination fees. Conventional loans that are assumable usually require a new application.

3. Closing Costs and Prepaids: Costs paid in addition to the down payment on closing day. These items can include attorney's fees, loan origination fee, appraisal fee, credit report, document preparation, escrow fee, survey and recording fees, tax escrow, hazard insurance, two months of private mortgage insurance (if down payment is less than 20%), and somtimes the entire first year's private mortgage insurance premium.

4. Creative Financing: Usually refers to the sale of existing property. The seller provides part of the financing, or the lender "wraps" a new mortgage around an old one.

5. Down Payment: A specified percentage of a home's value paid at closing. Usually a down payment is 5%, 10%, 20%, or 25% of the house price. Private mortgage insurance is required for amounts less than 20%.

6. FHA Loan: The Federal Housing Administration insures mortgages, allowing buyers to obtain financing with as little as 3% down and level payments at slightly below conventional rates for the 25- or 30-year life of the loan.

7. Market Rate: An estimate of the average rate being charged by lenders for conventional, fixed-rate loans.

8. Mortgage: An instrument that sets up the conditions of payment for a piece of property already transferred to the buyer.

9. Negative Amortization: The principal balance of the loan actually grows due to payments that are not enough to cover all the interest due. Often negative amortization accrues during the years of a variable rate or graduated payment mortgage when the payments are less than market value.

10. Prepayment Penalties: Fees charged to a borrower who pays off his or her loan balance before it is due.

11. Points: A point is 1 percent of the loan balance and is charged by the lender to issue a loan. Points can be a negotiable item between buyer and seller or buyer and lender, and usually range from 1 up to 7 or 8. Commonly 1 1/2 to 4 points are paid on a conventional loan.

12. Private Mortgage Insurance: On conventional financing, including adjustable rate financing, lenders require that the borrower purchase private mortgage insurance against default on loans with down payments of less than 20 percent. Usually 1/4 to 1/2 of a percent of the loan amount, the private mortgage premium is added onto the monthly payment.

13. Qualifying: A buyer must qualify for a loan. Usually the monthly payment cannot be more than 28 percent of the buyer's gross monthly income, and all of the buyer's monthly debt cannot total more than 33 to 36 percent of his or her monthly income. Sometimes a lender will allow a few percent leeway if the buyer has a good, clean credit history.

14. Title: An instrument that shows the buyer has clear ownership of the property. A loan does not usually close until the title company has assured the lender that there are no hidden problems with a title to a piece of property.

15. Title Insurance: A policy (required by the lender and paid for by the borrower) that pays off the loan if a problem with the title arises.

16. VA Loan: The Veterans Administration guarantees the first $27,500 of a home loan, allowing the lender to grant a mortgage loan to a qualified veteran with little or no down payment.

See below for links to more Mortgage Information websites.

National City Mortgage

Valley View Mortgage

Countrywide

Mortgage 101.com

Interest.com

Mortgage-Calc.com

USRealNet Mortgage Calculator

~Tina Jan~
Coldwell Banker Kivett-Teeters
1655 E. Sixth St.
Beaumont, CA 92223
Bus: 951-845-5520 Ext. 105
Fax: 951-845-4916
Cell: 909-446-2666
tina.jan@coldwellbanker.com