By Marcie Geffner
Getting a mortgage is a daunting task for most first-time home buyers. The process needn't give rise to anxiety, however. Mortgage-related jargon isn't difficult to understand in and of itself, although there many words and phrases to learn. Here are some basic questions and answers to help you get started:
What is a mortgage?
A mortgage is a legal promise to pay a debt that's secured by real property. If the borrower doesn't pay the debt, the lender has the right to 'take back' the property and sell it to cover the borrower's debt. Almost any type of property can be mortgaged, but the home mortgage is the most familiar. A mortgage is a form of financial leverage that enables the borrower to put more money to use. Remember the Monopoly board game? Smart players flip over their property cards, borrow money from the bank, then use the money to buy more property and build houses and hotels. The 'mortgages' are paid off when the rents start flowing in from the unmortgaged properties. That's leverage.
Where can I get a mortgage?
Traditionally, savings-and-loans associations were the predominant source for residential mortgages. Today, mortgages are also available from banks, mortgage banking companies, consumer financing companies and credit unions. The phrase 'mortgage originator' means any type of company (or individual) that lends money secured by real property. If a home seller lends money to the person buying the seller's home, it's called 'seller financing' or 'seller carry-back financing.'
How can I get the best mortgage?
There is no one best mortgage for everyone. The best mortgage for you depends on your personal financial situation, your tolerance for risk, the amount of cash you have available for your downpayment and closing costs and the length of time you plan to live in your newly purchased home. A mortgage broker or loan officer can help you figure out which mortgage best fits your needs.
How much does it cost to get a mortgage?
A mortgage can cost anywhere from practically zero out-of-pocket to thousands of dollars. If you pay higher up-front fees, you should get a lower interest rate. Your total monthly mortgage payment will depend on the type of mortgage you want, how much you want to borrow, your downpayment percentage, the interest rate climate, the term of the mortgage, your personal credit history and other factors.
What is the process of getting a mortgage?
The first step is to complete a loan application, which asks for information about your income, your stability of employment, your assets (e.g., property, cars, bank accounts and investments) and your liabilities (e.g., auto loans, credit-card debt). The lender will rely on documentation (e.g., a credit report, paycheck stubs, bank account statements, tax returns) to verify the information. If the lender decides you are creditworthy, a professional appraisal will be performed to determine whether the home you want to buy is also acceptable to the lender.
© Copyright Marcie Geffner. All Rights Reserved.
This article may not be used or reproduced in any manner whatsoever, in part or in whole, without written permission of the copyright owner.