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The
Documents:
Loan
application standard residential loan application form to apply
for a loan
Credit report credit
bureaus report information about your existing and previous debts
and rate how you have repaid the
obligations
Appraisal independent appraisal to
determine the market value of the home
Survey verifies
property boundaries and confirms that the legal description of the
property as stated in the sales contract is
correct
HUD-1 settlement
statement itemizes the services provided and lists all charges to
the buyer and seller
Truth-in-lending
statement a statement which discloses the annual percentage rate,
finance charges, the amount of the loan and the total payments
required
Mortgage or deed of trust
pledges the property you are buying as security for the
loan
Promissory note when
you sign this note, you are promising to repay the
loan
Types of Mortgages:
Conventional mortgages
the standard product of lending institutions which are usually sold
to investors in mortgages. Down payment assistance programs can be
linked with these mortgages to reduce the up-front costs. Available
with both fixed and adjustable rate mortgages with many loan
terms.
Federal Housing
Administration (FHA) insures lenders against default by
borrowers. Available
with both fixed and adjustable rate mortgages with maximum loan
amounts which are established for various geographic
locations.
Veterans Administration
(VA) the VA guarantees mortgages for veterans of the armed
services, those currently in the service, and their spouses. 100%
financing may be available.
Financing Options:
n
Fixed rate mortgages
interest rate does not change over the life of the
loan
n
Adjustable rate
mortgages (ARM) interest rate varies with a lower rate in the
beginning which may increase by certain amounts and within certain
set time frames, over the term of the
loan.
n
Convertible mortgages
combines features of the fixed rate and the adjustable rate
mortgages. It allow the
borrower to start out with an ARM with the capability of switching
to a fixed rate at a later date.
n
Buy-down the lender is
paid a lump sum to temporarily buy down the interest rate. The buy-down rate may be in
effect for 3-5 years, during which time the rate gradually increases
to the contract rate.
Mortgage Comparison Terms:
n
Interest rate these are
constantly changing and different rates are applied to different
programs.
n
Interest rate lock-ins
you will want to know if the lender will hold, or lock-in the
initial rate quoted until closing. There may be fees associated
with the lock-ins.
n
Origination fee a
lenders charge for originating and processing the loan. Typically 1% or more of the
loan amount.
n
Application fee covers
the costs of credit reports, appraisal fees, and other miscellaneous
expenses related to determining whether the borrower qualifies for
the requested loan.
n
Points - a point represents 1% of
the loan amount.
Borrowers may decide to pay points to keep the interest rate
lower and, thereby lower their monthly payments. Points are normally
paid at closing.
n
Annual Percentage Rate
(APR) total yearly cost of a loan. It includes the interest
rate, mortgage insurance, and
points. | |
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