Teach yourself the basics

"Basics of a Mortgage Loan"

A mortgage loan is a financing instrument where a lender requires the borrower to put up a real property (defined as the property and the house that stands on it) as security for the loan.

During the loan period, the lender holds the title of the property in lien, until the loan is completely paid. Moreover, in cases, where the borrower defaults on the loan payments, the lender assumes ownership over the property.

Pro-actively educate yourself on the terms, conditions, and costs that go into a mortgage loan contract to get one that is tailored to answer your financial needs.

The first thing you can do is to improve your credit score and assess your sources of income/savings. This will guide you in determining how much you can comfortably set aside on a monthly basis to pay for the loan, and the costs associated with applying for it.

The next step is to conduct an online research on mortgage loans. The results should provide you the names of the companies, the types of loans and rates they offer. Most of these companies have an email address, FAQ section, and operator on line to answer your inquiries. Some even provide an offline address and phone numbers for your convenience.

Other sources may be your local bank, online seller, property resellers, and credit unions. Alternatively, you can ask friends to refer you to realtors, and agents, who’ll take the time to introduce you to lenders.

Lastly, surf the Federal government website for information on mortgages. These websites are excellent sources of information for providing you an accurate picture in getting a mortgage loan.

When you have a better, idea of what the probable terms, conditions, and the fees a mortgage loan comprises, you’ll be in a best position to shop and negotiate with any lender.

What costs should you zero in on to get a better mortgage loan? Focus on the principal payments and the interest rate. If your credit score strong, you pay more discount points and your down payment is more than 20% of the entire loan, you’ll end up paying a lower monthly repayment fee.

Another factor is the value of your real estate property and the down payment you can afford to pay. You can prepare for this by saving up at least 60 days before you pay the down payment.

These are the four costs that your monthly payment will be made up of, when an escrow is used:

•Principal amount – the loan balance.
•Interest owed on that balance.
•Real estate taxes - assessed by government agencies, in payment services like fire department, school construction, road improvement, and police services among others.
•Property insurance - which is coverage for protection against all sorts of disasters and fire.
An escrow is a deposit of funds or deed by one party for the delivery to another party, between a buyer, seller, lender, or borrower. The escrow assures the other party that no funds or property will take place until all the instructions on the contract is fulfilled.

Although the fees mentioned above are the key costs, you should be aware that there other fees may arise from the closing costs. This collection of costs is called the good faith estimate.

The amount of taxes you pay, buyers’ attorney fees, documentary stamps on new notes, and transfer and recording fees all differ. Request access to the good faith estimate, and go over these costs prior to signing the mortgage agreement.

No matter how big or insignificant you believe your mortgage loan is, you should educate yourself on the basics. It’s the best way to ensure your home stays in your hands.

© Richard Mccaffery, 2006
http://www.mortgagelendingsite.com/basics-of-a-mortgage-loan.htm

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