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Current Interest Rates
30 Year Fixed = 5.625% - 15 Year Fixed = 5.125%
(TO START LOOKING FOR A LOAN, CLICK HERE)
WHAT YOU SHOULD KNOW ABOUT MORTGAGES
WHAT IS THE DIFFERENCE BETWEEN A MORTGAGE AND A DEED OF TRUST?
In deciding to purchase a home, most home buyers have to borrow money from a lending institution in order to purchase their home. The home loan they receive is called a "mortgage."
Generally, a mortgage is a loan of money to the home owner secured by real estate.
A mortgage agreement is made between two parties: the borrower and the lender.
A Deed of Trust is different in that there are three parties: the home owner, the lender, and a third party (usually a title insurance company). When a loan is made to a homeowner, the title insurance company, being a neutral third party, holds title to the real estate until the loan is fully repaid. Once the loan is paid in full, the title company transfers property title over to the homeowner. If the homeowner fails to pay the loan, the title Company will transfer title over to the lender. Most states have foreclosure statutes that must be complied with prior to transferring the property title over to the Lender.
The main difference between a mortgage and a Deed of Trust is in the foreclosure procedure. Pursuant to a mortgage, if a party does not pay their loan, the lender must bring a court action in order to foreclose on the property. Pursuant to the Deed of Trust, if the home owner does not pay their loan, the foreclosure process is much faster and performed pursuant to state statutes requiring special notices to the homeowner.
Deads of Trust are seldom used in Iowa but are often used in other states. For further information, please seek the advice of an attorney.
WHAT ARE SOME OF THE MOST COMMONLY USED MORTGAGE TERMS?
A few of the mortgage terms a homeowner should know are as follows:
An "Abstract of Title" is a document that a title insurance company or, in some states, an attorney, will prepare giving the history of the home. The document usually lists who owned the property all the way back to its first original owner. The document will also disclose any liens or encumbrances on the title which may affect whether lenders will provide a loan or whether the new homeowner will want to take title to the property.
An "Adjustable Rate Mortgage" (ARM) is a mortgage which has an interest rate that changes up or down depending upon a specified market index or margin that are agreed to in advance by the homeowner and lender. A "Cap" is a limit placed on how high of an interest rate the lender may charge the homeowner.
A "Credit Report" is a report that provides the lender with the credit history of the home buyer. The report is usually prepared by a large credit reporting company. The credit report will usually state whether the prospective home buyer has any bankruptcies, foreclosures, delinquent credit payments or has failed to pay a credit loan.
An "Escrow Company" is an independent third party who takes care of the loan transaction. The escrow company, pursuant to escrow instructions, will handle the transfer of money and take care of the documents. In some states, they are licensed escrow companies while in other states an attorney handles the transaction.
A "Fixed Rate Mortgage" is a loan that has a set interest rate for a specific time period. For example, a 30 year loan fixed at an 8% interest rate.
An "FHA" loan is a loan that the Federal Housing Association insures. The FHA insures the home buyer's loan to the lender. Usually, there is a fee for this insurance.
A "Point" is equal to 1% of a loan amount. Therefore, if your loan is for $100,000 and you must pay 2 1/2% points, your cost will be $2,500.
A "VA" loan is a loan guaranteed by the Veteran's Administration. A lender usually provides the home owner with a loan while the VA guarantees that the loan will be repaid to the lender.
WHERE SHOULD I APPLY FOR A MORTGAGE?
A potential home owner may obtain a loan from one of five types of lending institutions. There are banks, mortgage bankers, mortgage brokers, credit unions and savings banks (savings and loan associations). A potential home buyer should check out all available methods of obtaining a home loan in order to find the best terms and conditions that meet their particular needs. Finding a quality home loan requires diligent shopping since rates and terms vary from lender to lender.
If you are purchasing a home and obtaining financing, you may choose to have an attorney review the real estate sales contract and the loan agreement. This is especially important if the home purchase requires special conditions not found within a standardized contract. Additionally, in some states, attorneys perform the closing procedures. For further information, please consult with an attorney.
WHO ARE FANNIE MAE, GINNIE MAE, AND FREDDIE MAC?
Federal National Mortgage Association (FNMA or Fannie Mae), Government National Mortgage Association (GNMA or Ginnie Mae) and Federal Home Loan Mortgage Corporation (FBLMC or Freddie Mac) are all secondary market lenders. Often many retail lenders actually receive their funds from a secondary market lender. These secondary lenders have assisted the national mortgage market by allowing money to move easily from state to state. The movement of loan funds helps to avoid a situation where mortgages are only available in certain areas or states. Also, the secondary lenders have established regulations and guidelines that help the general public. For example, the secondary market will not recycle a loan from a commercial lender unless the new home owner meets specific financial qualifications.
WHAT CAN I DO IF I HAVE BAD CREDIT BUT I WANT TO OBTAIN A HOME LOAN?
If you have bad credit, it generally cannot be avoided on your credit report. However, you can help to correct credit errors or misunderstandings by writing a letter to the creditor or by writing letters to be included within your credit reports. Sometimes, a letter explaining a sudden loss of a job, a lay off, or a long term illness will change the view of the lender in reviewing your credit report. Additionally, you should provide any documentation proving your reason for failing to pay on your debts. By law, credit reporting agencies are required to include letters of explanation along with any documentation proving such explanation with the credit report. As a general rule, a bad credit report usually stays on your record for a period of 7 years. If you need further information about changing a bad credit report, please seek the advice of an attorney.
WHAT HAPPENS IF I CANNOT PAY MY MORTGAGE?
If a home owner fails to make payments upon the mortgage, the lender may foreclose on the
property. Depending upon the terms and agreements made within the original mortgage contract, the lender may do a statutory foreclosure or a judicial foreclosure. A statutory foreclosure can be performed without bringing a court action. The lender does have to follow strict state regulations as to the proper notices and opportunities to provide payment by the home owner before a sale of the property occurs. This procedure is relatively fast. If a judicial foreclosure action is required, the lender must file a complaint with the court system and go through the litigation process to obtain the right to foreclose on the property. In several state jurisdictions, the home owner is allowed the right to stay in possession of the home until the foreclosure process is finalized or a sale of the home occurs.
Since some lenders prefer to avoid the cost of foreclosure, they are sometimes willing to have a work out agreement with the home owner. The lender may accept "interest only" payments or partial payments for a while in order to assist the homeowner. There are detailed regulations regarding foreclosure procedures. It is best to consult with an attorney if your home is endangered by a foreclosure proceeding.
I CAN RECEIVE A BETTER MORTGAGE RATE ON MY RENTAL PROPERTY BY STATING I LIVE ON THE PREMISES. COULD I GET INTO TROUBLE?
Many lenders offer better interest rates if the homeowner is to live on the property or if they are a first time home buyer. Some borrowers choose to lie about their intent to occupy the property in order to qualify for these lower interest rates. A lie about your intent to occupy the property is fraud and a
federal offense. There are severe penalties for misrepresentations made within a loan application. Government officials do prosecute these types of cases. Often, this information is uncovered if a default on the loan occurs or a foreclosure procedure has been enacted.
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