Finding the Right Mortgage

Home Mortgage 101

• Related Articles:
  • Finding the Right Mortgage
  • First Time Home Buying
  • Pros and Cons of Agent vs. Owner
  • When To Buy a Home
  • Houses for sale for $5,000 or less across America
  • How to Avoid Loan Fraud
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  • Tips on Saving for a Down Payment on your New Home
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  • When To Buy a House
  • Home Buying Tips and Tricks
  • 5 Common Home Buying Mistakes To Avoid
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With all of the elements involved in a home mortgage, it’s important to find a mortgage loan that specifically meets your needs. When you approach a mortgage broker, he can serve a number of purposes. A mortgage broker might be able to help you choose a lender and loan that is best for you. If you do a bit of research on the important elements of a mortgage loan, however, you might feel comfortable going directly to the lender.

Types of Loans

There are a number of mortgage loan types giving you flexibility in how you choose to pay off your property. Most loans can be repaid over a term of 30 years or less, and different loans offer varying methods of repayment. A fixed rate mortgage loan has consistent principal and interest payments each month over the loan period. Variable or adjustable rate mortgage loans, on the other hand, can have any one of a number of “indexes” and “margins” which determine how and when the rate and payment amount change. Finally, some mortgage loans have short terms with a large final payment called a “balloon.” However you chose to pay, there’s a home mortgage that meets your needs.

Comparing Loan Costs

While comparing Annual Percentage Rates (APRs) can be an effective way to shop for a loan, it is important to make sure that you compare similar home mortgage loan rates for the same loan amount. Before you make any decisions, however, make sure you consider how much up-front cash will be required with any home loan. Another useful way to compare identical loans is by their up-front points (each point represents one percent of the total loan cost) and other fees. This can help make the proper loan for you readily apparent.

Lock-Ins

If this option is offered, “locking in” your mortgage rate when applying for a home loan or during the loan processing allows you to keep your rate and points from changing until the settlement or closing of the escrow process. As long as you find out the details regarding the length of the lock-in period, the fees associated with it, and whether it’s refundable in the event of an application rejection, a lock-in can greatly benefit you in the long run.

Tax and Insurance Payments

Escrow accounts are set up by your lender so that all real estate taxes, property insurance, mortgage insurance, and/or flood insurance can be covered by part of your monthly home mortgage payment. In addition to covering the cost of your loan plus interest, your monthly mortgage payment can help manage other tax and insurance payments. Ask your lender about the establishment of an escrow account.

Mortgage Insurance

If your loan is considered a higher risk loan — those with a down payment of less than 20% of the sales price, for example — your lender might require that you obtain private mortgage insurance or government mortgage insurance. You may be billed monthly, annually, by an initial lump sum, or some combination of these. You may also be offered “lender paid” mortgage insurance (“LPMI”) where the lender purchases mortgage insurance and covers all premiums, raising your interest rate in exchange. Though your interest rate might rise, LPMI may ultimately reduce your settlement costs.

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