A mortgage is a long-term loan that a home purchaser obtains from a bank, thrift, independent mortgage broker, online lender or from the property seller. The house, and the property it is on, serve as the collateral for the loan. Documents signed at the closing provides the lender with a lien against the property being purchased. If the agreed upon mortgage payments are not made, the lender can take possession of the property through a foreclosure proceeding.
Since mortgages involve a substantial amount of money, they are generally payable over long periods of time. Most bank mortgages are paid over 15 to 30 years. The monthly payments gradually decrease the principal balance, slowly at first as most of the payment is applied to the interest, and then rapidly toward the end of the loan.
Those applying for a mortgage should obtain their credit report from all the credit reporting agencies and cost you thousands of dollars in extra interest and in some cases may result in a denial of credit. According to professional studies, a substantial percentage of all credit reports contain errors that are significant enough to prevent the issuing of a mortgage commitment.
It’s important of anyone applying for a mortgage to track the interest rate. It’s important to find out what the current mortgage rates are and whether they are decreasing or increasing. Mortgage rates constantly fluctuate with the financial market. There are a number factors that affect interest rates such as the political or economic environment, making it difficult to predict interest rates, however an understanding of key economic indicators can provide guidance to the future direction of mortgage interest rates.
To find the best deal possible, research the rates and the banks offering them. Compare each of the mortgages offered by several lenders before you decide to apply. Also compare the principle payoff rules, such as prepayment penalties, and any other fees the bank imposes such as mortgage insurance.
When it comes to mortgages, there are a number of different fees that may be imposed. Different banks and lenders will impose different fees. These fees can add thousands of dollars to the cost of the loan. It’s important to know upfront what these fees will be, and compare them with other lenders. When comparing fees, be aware that that different lenders will call refer to the same fee by a different name. Also, a lender might offer to waive one fee but then add a different one, so it’s important to compare the whole package.
It’s important to pay close attention to the terms of the mortgage loan, know the type of mortgage you're getting, are there prepayment penalties, how high can the payment become, Is there a mortgage insurance requirement, Is there a lock-in period, and if so, are the lock-in fees refundable in case your application is not accepted, and what is the payment schedule.
After applying for a mortgage, the lender will either decline the mortgage application, or provide a mortgage commitment. A mortgage commitment is the legal document from the bank promising to give the borrower a loan subject to certain conditions. When signing a real estate contract to purchase a home, it important that the contract contain a mortgage commitment contingency. This is a clause in the contract of sale authorizing the buyer or seller to terminate the contract should the buyer fail to obtain a mortgage commitment within a certain period of time. This is one of the most important clauses in a real estate contract.
Finally, before you begin shopping for a good mortgage loan, you should decide which mortgage program is the best for your financial situation. Since a mortgage is a major purchase, it is important to know which mortgage program is best for you. Current financial markets offers you a vast choice of loan products and new opportunities that previously did not exist, so it pays to be knowledgeable with regard to the different types of loan programs available.