A mortgage is legal agreement wherein the debtor transfers the interest of an unsettled duty to the creditor. It includes the principal amount plus the monthly interest. Therefore, before entering a mortgage deal, evaluate yourself if you can pay your monthly obligations during the duration of your loan.
Before getting a mortgage, know everything about the charges that you need to pay. Always ask your lender about the total amount repayable. This will save you from paying hidden charges that you are not aware of because you were so persistent in closing the deal. Here is a list to guide you on what to expect in mortgages:
The Down Payment:
The down payment usually requires a minimum of 5% up to a maximum of 20% of the property’s purchase price. However, the creditor may not ask you for any down payment if you acquire an FHA or a VA loan. The FHA or the Federal Housing Assistance loan aims to help low-income Americans to obtain a home. The same policy is applied with the VA loan or the Veterans Affairs loan but they only assist American veterans and their spouses.
Before paying the initial amount, ask your creditor about your options regarding the collection of your down payment. If you are low in budget, request for a lower initial cost. However, a minimal down payment means a higher monthly obligation. But if you have enough cash to pay for the 20% down payment, you can also do so. This will not only eliminate mortgage insurance but will also lower your monthly dues.
The Closing Cost:
The closing cost is determined just before closing the deal. Be sure to ask for a GFE or a Good faith estimate wherein the amounts to be paid are itemized in the list. A GFE usually includes:
è Items payable in connection with loan
è Items required to be paid in advance
è Reserves deposited by the lender
è Title charges
è Government recording and transfer charges
è Additional settlement charges
The subtotal of all these amounts plus the down payment is equal to the closing cost of the loan.
In some instances, the lender pays for a part or the whole closing cost provided that you repay the amount to them with an interest.
The Application Fee:
The application fee is a fixed rate or a percentage of the loan applied for. It may range from $25 to $100 or more as required by the lending company. Some may ask you to pay the amount upon submission of your form while others may collect it after the approval of your application.
The application fee is used in the processing of your loan request. It is pure profit for the bond originator, also known as a mortgage originator, because they need to dedicate time in preparing your application for approval.
The Mortgage Rage Lock Fee:
Since the rates and interests may vary from time to time, many lenders offer the mortgage rage lock with a corresponding fee. A mortgage rage lock is an agreement wherein the lender freezes the interest at a given number of days. Mortgage companies usually gives a 60 days period upon submission of the loan request. Therefore, no matter how high the interest shoots up during the closing, you are only required to pay the amount from the start of the lock in period.
The Appraisal and Inspection:
Before a lending company approves your application for a loan, they will conduct an appraisal of your property. This way, they will be able to assess if your property can sum up to the loan you apply for. Together with the appraisal, they will also conduct an inspection. This inspection will evaluate the works that are to done once you won’t be able to settle your obligations.