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Points: A point is 1 percent of the loan balance and is charged by the lender to issue a loan. Points are negotiable between buyer and seller and can range from 1 to 8 points. Conventional loans are 1 to 4 points in most cases. Alternative Financing: Mortgage instruments for both new and existing home allow the buyer to qualify at a lower than market rate. Among these are adjustable rate mortgages, buy- down mortgages and graduated payment mortgage. Prepayment Penalties: Fees charge to the borrower who pays off his or her loan balance before the due date. Private Mortgage Insurance: On conventional financing, including adjustable rate financing, lenders require that the borrower purchase private mortgage insurance against default of the loan with down payments less than 20%. Down Payment: This is a percentage of the homes value paid at closing. Down payments are 5%, 10%, 20% or 25% of the house price. Market Rate: This is a estimate of the average rate being charged by the lenders for conventional and fixed rate loans. Closing Cost And Prepays: Cost paid in addition to the down payment on closing day. These can include loan origination fees, appraisal fees, credit report and document preparation fees, escrow and recording fees, hazard insurance and two months private mortgage insurance. Assumable Loans: This is a loan that can be pick up by a subsequent buyer for a small assumption fee. It saves thousands of dollars in closing cost and loan origination fees.. Creative Financing: Refers to the sale of existing property. The seller provides part of the financing or lender "wraps" a new mortgage around an old one. Qualifying: A buyer must qualify for a loan. The monthly payment should not be more than 28% of the buyer gross monthly income. The buyer debt cannot be more than 33 to 36% of the monthly income. Some lender will allow a few percents leeway if the buyer has a good , clean credit history. Title: This is a instrument which shows the buyer has a clear ownership of the property. A loan dose not close until the title company has assured the lender that there are no hidden problems with a title to a piece of property. Title Insurance: A policy required by the lender and paid for by the borrower which pays off the loan if a problem with the title arises. Negative Amortization: The principal balance of the loan grows due to payments which are not enough to cover all the interest due. Often negative amortization accrues during the years of variable rate or graduated payment mortgage when the payments are less than market value. Mortgage: A instrument which sets up the conditions of payments for the property already transfer to the buyer. FHA Loans: This is the Federal Housing Administration. It insures mortgages, allowing buyers to obtain financing with as little as 3% down. VA Loans: The Veterans Administration guarantees the first $27,500 of the home loan. This allows the lender to grant a mortgage to a buyer with little or no down payment to qualified veterans. |
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