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Mortgage Dictionary
Adjustable Rate - ARM
Also called Variable Rate, in which the loan is adjusted periodically based on a pre selected index.

Amortization Period Ginnie mae list of brokers and their best rates

The time period over which equal payments would pay off your debt. This is usually 25 years.

Annual Percentage Rate - APR
An interest that is proportional to the cost as a yearly rate. This rate is calculated based on any points and fees and is based on the loan going to its full-term.

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A contract between buyer and seller where the buyer assumes responsibility for the seller's existing mortgage. This agreement usually saves the buyer money because closing cost and the current rate don't apply.

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Blended Payments

Payments that consist of both a principal and an interest component, paid on a regular basis during the term of your loan.

Check out Conversion rates for Seniors

Buy down
A way of lowering the buyer's monthly payments for a short period. The lender subsidizes mortgage by lowering the interest rate for the first couple of years of a loan.

A limit of the amount of the interest or monthly payments for an ARM that may change.

Closed Mortgage
An agreement with your broker that can not be prepaid or refinanced before reaches maturity, unless terms say so.

Closing or settlement is the meeting at the conclusion of a real estate sale in which the property and money are traded between the two parties involved.

Conventional Mortgages
Not greater than 75% of the purchase price of the home. If it exceeds this limit must be insured against default, and are called high-ratio mortgages

Debt to Income Ratio
Is ratio expressed as a percentage, that is calculated from dividing a borrower’s monthly payments on long term debts by the borrower’s gross monthly income.

Discount Points
Prepaid interest calculated at closing by the lender.

Down Payment
Cash paid by the borrower at closing that is the difference between home purchase price and the mortgage.

Earnest Money
Funds given by a buyer to a seller as a deposit to commit the buyer to the home purchase. It is subtracted from closing costs.

The value that owner has in real estate over the obligation against the property. Equity is a calculated fair market value minus the current debt amount.

Money given to another party that will be held to cover payments such as tax or insurance payments and earnest money deposit.

Fixed Rate Mortgage
Rate remains constant throughout the life of the loan. Check with our lead to find a 30 year fixed rate broker.

A legal process where the lender obtains ownership of the property after the borrower has defaulted on payments.

Loan to Value Ratio
The ratio between the loan and the assessed value of the property.

Market Value
The price that a property could possibly be worth in the marketplace.

Insurance that protects lender or broker against loss if a borrower defaults. This is required when the loan to value ratio is large.

Origination Fee
A fee charged by a lender for loan application paperwork.

Payment Frequency
The option of making regular payments every week, bi-weekly, twice a month or monthly.

Means Principal, Interest, Tax and Insurance.

The duration of the current agreement. It could be amortized over a long period with a shorter term. When the term expires, the balance of the principal owed can be repaid or a new agreement can be entered into at the then current interest rate.

The reviewing process of granting a loan to a potential homebuyer.

Variable Rate Mortgage
A loan in which the interest is adjusted periodically based on a pre selected calculator value.

No Closing Cost Refinance

No closing cost refinancing is a type of financing whereby the borrower is not required to pay any of the normal closing costs associated with obtaining new mortgages. Fees when obtaining loan origination, appraisal, credit report, attorney, title fees. In the case of a no cost refinance, the lender will pay these fees but will charge the borrower a higher rate of interest for the life of the loan.

The no cost refinance makes sense if you only plan on keeping the mortgage for couple of years. Generally it is better pay the closing costs and obtain a low rate.

If you refinancing to get cash out, means you are essentially refinacing loan to a greater amount and keeping the difference in cash. You can actually lower your payment and pay off other debts with cash, depending on your current rate, as well as lower your monthly payments with a cash out refinance.

A home equity loan is a loan that you can get to access your equity. It is also referred to as a second mortgage and lets you quickly get cash for your equity without having to refinance. A home equity line of credit is like a credit card except but uses your house equity to cover bad credit.

If you use the equity in your home to consolidate debt, you only lower the rate, you do not reduce the amount or your debt. If you increase monthly cash flow with consolidating, consider paying down your debt or saving and investing. You also could consider home improvement financing.

If you have to borrow money, home equity loan could be a great source of credit. It would provide you with a large amount of cash at relatively low interest and with some tax advantages not available with other kinds of loans.

However, with home equity lines of credit you have to use your home as collateral for the loan. This could put your house at high risk if can not make your monthly payments. Loans and a large final payment may force you to borrow even more money to pay off the debt, or they could put your house at high risk if you do not qualify for refinancing. If you sell your house, townhouse, mobile home, manufactured home or a condominium most plans will require you to pay off your line of bad credit at that time. Because home equity loans give you easy and quick cash, you might end up borrowing more money more then you can afford. Mobile home broker rates are usually different then one for a house or a manufactured home refinance rate.

There are other ways to borrow money from a lending institutions, such as installment loans. This loan plans places an additional mortgage on your home, but money is usually loaned in a one lump sum. Second mortgage usually has fixed rates and fixed payments.

You should also look into borrowing from a line of credit that does not use your home as collateral. Examples are credit cards or loans for specific items, such as cars or tuition.

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Rates and Refinance General Information

Refinancing information is available from many different sources. Before they apply, borrowers will often research online on their own looking for free lead, helpful tips on how to refinance mortgage, or they may contact real estate brokers or loan officers seeking home refinance tips. If you want to make sure you are getting the current best rate, check with multiple lenders from our comparison table. Spending couple of extra minutes filling several applications could end up saving you thousands of dollars when you decide to refinance.

A broker or loan officer is still the most sought after information bank in the real estate market. The explosion of content on the internet has caused much of the borrowing market to look elsewhere for advice on cheap refinance information. Even with the introduction of the internet, seminars, and literature on equity information, the specialists should handle your finances.

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Many of these online home loan lenders or brokers do allow the borrower to handle their own deals; however this can get them in trouble late in the transaction. A broker or loan officer is aware of all the documentation needed to submit a file and can predict what the lender will and will not look at in the loan. Often times, borrowers are unable to provide certain documentation and the loan is declined or canceled.

This is why brokers are essential to the transaction. Broker company or a lender (be it for FHA, VA...) already have established real estate connections and can get the deal done. The best thing for a borrower to do is, pay a little extra for a broker company and leave the labor of completing the real estate transaction to them.

Reasons For Refinancing

If you clearly understand reasons to refinance, it will help you choose a loan that will meet all your financial goals. Here are some reasons:

1. It Can Lower Your Monthly Payment

Reducing by 1/2 to 3/4 % will lower your payments. Otherwise you will be paying too much for every loan payment.

One way your payment will be low is if you simply refinance at a low interest. You can try to change terms to lower your payments. Getting a 30 year term instead of 15 year one can significantly lower your payments. If long-term savings is what interests you more, if refinance from a 30 year to a 15 year plan, it may save you thousands over the life of your loan. Another way to lower your payments is if you switch from a plan with principal and interest payments to a plan with interest only home loan payments.

2. Access To Cash

Home equity is a in a way a savings account that you could access with cash-out refinance. You could finance a home improvement that will increase the value of your home, or pay for schooling or pay off high interest CC debt.

3. Refinance can pay off other debts

The difference between credit card debt and a mortgage could mean thousands of dollars. CC debt is compounded and mortgage loan rates are simple, and usually tax deductible. Equity can be used for home purchases can save you money in interest in the long run instead of using credit cards.

4. Refinancing can convert an ARM to Fixed Rate

If you plan on living in your home for only couple of years, paying a higher rate for a long term fixed rate will cost you money. Try refinancing to an Adjustable Rate and pay a much lower amount each month.

If you have an ARM and plan to live in your home longer than couple of years it would be a good move to convert to a fixed rate loan.

Refinance FAQ

How much money can I borrow with home equity line of credit?

Depending on your income, credit history, and the amount of your debt, and if you refinace home equity lenders could lend you up to 80% of value of your home less the amount owed on your debt.

Is refinancing the right option for me?

Look at your financing related goals: are you looking to improve your monthly cash flow, reduce your term, do you need to take out cash utilizing the equity from your home? Obtaining the right loan for your particular needs could make sense even when rates are not at their lowest levels. First identify your goal and contact a professional for suggestions on lending programs that would help you meet your objectives. Then shop for rates after you have selected the appropriate program.

Will my interest for second mortgage change?

If your loan is fixed-rate, the rate is set for the duration of the loan. Many lenders will offer variable rate mortgages, and these can provide for periodic interest changes. If your contract lets your lender adjust the rate, make sure to understand when exactly can the lender change the interest and if there are any limitations on how much the rate can change.

What is an interest only home loan?

An interest only loan with which you can just pay the interest or the interest and portion of the principal whenever you want during the pre designated amount of time. These loans can be 20-year fixed or ARM. Check our bad credit home loan calculator to get a free online lending quote for interest only adjustable rate best loan.

What is a broker?

Mortgage brokers or a home finance company is like independent insurance agents. They have access to lenders, lead you to many different programs and could give you a free quote. In some cases, especially where credit is not poor, and non conforming property is involved, a broker can help find funding for you.

What is the best way to find lenders?

It is a good idea to contact at least three to five lenders or even a bank for input on programs and best rates. You can do all of your shopping on-line or by phone. If there are any usual twists to your scenario, it is best to disclose as much information up front as possible to be certain you are making an "apples to apples" best home rates comparison amongst lenders. When making low interest refinancing rates comparison you must be sure to compare lowest rate of similar terms. Or maybe you qualify for FHA or VA loans.

What can home equity credit line do for me?

If you need to borrow money, home equity lines just could be a great source of cash. It would provide you with a large amount of cash at relatively low rates and with some tax advantages not available with other kinds of loans.

Will the lender require a fee to lock in my home interest?

For a traditional 30-90 day rate lock, the lender will not require the borrower to pay a lock fee, but for the privilege of locking for a period beyond 90 days they may. Some lenders allow borrowers to lock and then float the rate down one time during the cheap mortgage process, typically a borrower is required to bring in a fee of ½-1% of the amount which is then credited (or refunded) to them at closing. It is a lock fee the lender requires to insure the transaction will in fact close. Sometimes you may even end up with a rate close to the prime lending rate.

If I lock my rate and rates go down, will the lender give me the current lowest rate?

It depends on the lender involved, prime rate and how much rate declined. Some lenders may re-price the debt at a rate closer to market if there has been a substantial rates decline and some may prefer that a mortgage is canceled rather than re-price it at a current market rate. Some lenders allow borrowers to lock and float the rate down one time during the process, generally a borrower is required to bring in a fee of 0.5-1% of the amount which is then credited or refunded to them at closing time. It is a lock fee the lender will require to insure the transaction will in fact close.

How do I choose a second mortgage lender?

If you are looking for a lender, make comparisons between them. Look for rates, and origination fees, closing costs and repayment terms. Check with your local banks, credit unions and finance companies.

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How do I calculate home payments

Easiest was to calculate your rates and payments is to get a best refinance rate comparison check with one of our featured lenders or use our payment calculator above.

What is a super jumbo mortgage and how much higher is the interest?

Usually super jumbo exceeds $650,000. It generally has a rate 0.25% higher than average jumbo mortgage.

What paperwork will the lender need to process my mortgage?

The answer depends if you have poor credit and the amount of equity you have in your property. On a typical fully documented application (where an applicant is seeking to qualify based on an employee's salary), the lender will require: one month's current pay stubs, W-2's for the prior two years and bank and investment account statements for the prior 2-3 months. If an applicant is self-employed then additional documentation could be required.

Is it possible to reduce my closing costs?

If you are refinancing, you could reduce some costs by asking your lender about them. Example: your lender could use your last home appraisal or your other credit reports or even recertify old documents for cheaper than getting new documents. Or trying looking into no closing cost refinance.

What are Mortgage Points?

Also known as discount points, they are fees the borrower pays the lender to lower the interest. Points are expressed as a percentage of the loan. Lenders charge points that are basically finance charges, to make a profit and borrowers buy points to lower their refinance rates and payments.

Is it a good idea to pay points for lower rates?

If you are refinancing or financing, paying points is not always the ideal option. Points paid for refinancing can be deducted only in small amounts from your taxes, so it could take couple of years before you benefit from a lower rate.

How long will I have to repay the second mortgage?

Some 2nd mortgage loans could go for 20 years and some could require repayment in same year. You should discuss the repayment terms with lenders and pick one who offers the best terms for your needs.

What is a prepayment penalty and is it generally advisable to get it?

A prepayment penalty allows the lender to charge a borrower additional interest, typically six months worth, when a it is repaid during the penalty period, which is usually somewhere in the first three to five years of the mortgage. If it does have a prepayment penalty, this is clearly stated within the disclosures or prepayment penalty rider to the note. The advantage of taking a mortgage with a prepayment penalty is that it could carry a lower rate of interest or you may be permitted to take a it without paying for non-recurring closing costs. Will the lender require an appraisal of the property? If so, will I receive a copy of it?

Yes, the property is the collateral, therefore an appraisal is almost always required and if a borrower pays for the appraisal he or she is definitely entitled to receive a copy of it.

Can I avoid having to buy mortgage insurance?

Borrowers who have less than 20% equity in their home, can choose a mix of first and second mortgage (piggyback) to avoid insurance. The most common method of financing without insurance is to get 80% 1st mortgage, 10% 2nd and 10% equity.

What is the difference between 0 point and no cost mortgage?

With no cost mortgage, a borrower has accepted a higher rates, with the trade off that the lender or broker will pay for all their non-recurring no closing costs or at no charge. With 0 point mortgage, a borrower has opted not to pay points to buy their rates down but will still be paying for their base closing costs.

What is private insurance?

This is a special type of insurance that protects the lender if you default on your loan. It makes it possible for you to buy a home with as little as 3-5 % down payment.

What is a reverse mortgage?

A 2nd or reverse mortgage is the second loan against a house, manufactured or mobile home. It lets you borrow money against the left equity in your home. The maximum amount is determined as follows: (Appraised value of your house x a set percentage) - existing balance. You also may want to consider getting a home improvement financing loan.

What is a home equity line of credit?

It is a secured line of credit that lets you take advantage of the equity you have built up in your home. Home equity loan rate (lines of credit) are generally much lower than a credit card, and the interest is even sometimes tax deductible.

Mortgage Amortization

Your mortgage will probably be the longest loan you ever have you may be paying it for as much as 30 years! This period is called the 'amortization' period. It indicates the total of time it'll take to pay off the loan, presuming you make all payments in full and punctually. In general, the shorter your amortization, the less you pay in interest costs over the life of your mortgage. If you amortize your mortgage over 15 years instead of 25 you may be able to save thousands of dollars in interest costs. Good deal? Typically. The only challenge is if you may be able to afford the larger payments. A shorter amortization will generally translate as higher payments because you're paying off the loan more quickly. Typically, you may want to try to pay the highest payment what is comfortable for your family, but still leaves you the capability to save for a rainy day.

Mortgage Term

As vital as amortization is the current 'term' of the mortgage. This is the total of time for the current conditions of the mortgage, as well as the interest (whether locked in or variable) and the lender. In most cases, while many aspects of your mortgage might be changeable throughout its 'term', the interest and lender aren't. If you want to move your mortgage to another lender (for a better deal, for instance) you can probably pay a penalty. Mortgage terms may be as short as 6 months, or as long as 10 years. Usually, the longer the term of the contract, the more it'll cost you. Most lenders will think about a longer term to be higher risk to them after all, interest could go up and that means your mortgage might not be as profitable. Longer term mortgages will typically come with the highest interest rates. Also, lenders want to ensure that you stay with them after all, they're making money from your business. The term covers them in two ways: they insure that they make their money and that their clientele is 'stable'.

Interest Rates

A vital aspect of your mortgage is the interest. This rate is negotiated for a time period from 6 months to as long as 10 years. This time period is the period over what you can pay the agreed interest rate. The lower your interest, the less you pay in interest costs over the life of the loan. This may also save you thousands of dollars, particularly on the mortgages you negotiate when you 1st purchase your property. When you 1st purchase your property the total of your debt will be the biggest it'll ever be. now, the most of your payments will be interest charges and a smaller total will be used to decrease the 'principal' (which is the total of money borrowed.) so, the lower your interest, the less you're paying on this big sum of money and the more money you save in the long run. How do you get the best interest? Shop around. make sure to negotiate. Your business is the lifeblood of a lender remember that you're going to make them money. While they might want you to think that they're doing you a favor, in reality you're doing them a favor as long as you're paying off your debt as you should! A final word on interest: lenders 'stack' the deck in their own favor. Any rate they're willing to charge is at a level at what they believe they'll make money. This is certainly not a charity business. Now, if you 'lock in' your interest for 5 years you can probably pay more for your mortgage. Why? Because they want to ensure that they'll make money if rates go up. , anything what you do to decrease your risk (like locking in payments), you may be able to expect to pay more for because you increase risk to the lender. But, if you're willing to accept some risk at your end (particularly if you have a stable job and a good credit history) you're nearly generally better off with variable rate mortgage. This kind of mortgage lets the interest you pay to fluctuate with the market. While this sounds risky, it really lets you many of freedom and nearly generally saves you money, for two reasons: 1. The interest charged on variable rate mortgages are typically less than any 'locked in' rate 2. If the rates appear like they'll go up you may be able to usually switch to a 'locked in' interest at no penalty. In other words, you can not lose with the variable rate kind of mortgage (as long as you may be able to switch without penalty).

Closing Costs

You have found the house of your dreams. It is inside your budget. Your monthly payment is exactly what you'd want. You're prepared to sign the papers and take possession. Have you budgeted for closing costs? Some lenders attempt to assist you prepare for closing costs by giving you a "Good Faith Estimate" of these expenses. You might get such a announcement now, but they're only needed to mail it to you inside three business days of application. Because your lender does this, you might assume that all the closing costs are with the lender. Do not be misled by the lender's try to give you with a service! The lender is only preparing an estimate of the costs you might incur when purchasing or refinancing. The lender is not needed to get you a complete list of all the costs that you might face above and beyond the buy price of your home. Nor does the lender really know what all those costs may be. As a result, you may want to generally anticipate that the real costs are going to be more than the estimate. For instance, are you purchasing a newly built home? Have you considered the costs to putting up window coverings as part of your closing costs? Having bought brand new homes more than once, it's certainly something to keep in mind if you want many privacy in your home in the 1st not many days of moving in. This is one closing cost that no one will tell you about! But, your lender will have to release all the closing costs that they usually charge, if they can not guess the other charges that you may meet. You may be looking at a large range of closing costs from your lender, including: * Loan Origination Fee: This fee is typically known as a loan origination fee but on occasion is called a "point" or "points." It covers the lender's administrative costs in processing the loan. Often expressed as a percentage of the loan, the fee will differ among lenders. Usually, the customer pays the fee, unless otherwise negotiated. * Loan Discount: Also often called "points" or "discount points," a loan discount is a one time charge imposed by the broker to lower the rate at what the lender or broker could otherwise offer the loan to you. Each "point" equals to one percent of the total. As an example, if a lender charges two points on an $80,000 loan this amounts to a charge of $1,600. * Assessment Fee: This charge pays for an assessment report made by an appraiser. Credit Report Fee: This fee covers the cost of a credit report, what shows your credit history. The lender uses the info in a credit report to help choose if or not to support your loan and how much money to lend you. Lender's Inspection Fee: This charge covers inspections, often of newly constructed housing, made by employees of your lender or by an outside inspector. Application Fee: This fee covers the processing of an application for insurance. Assumption Fee: This is a fee that's charged when a customer "assumes" or takes over the duty to pay the seller's present loan. Broker Fee: Fees paid to brokers could be listed here. A CLO fee could also be listed here. While not all of these fees will apply in every situation, you may want to be prepared for many money to be going directly to your lender in fees. In many cases, you may be able to have these fees included in the total of the debt, what can save you from many financial pain on closing. In general, there are two broad groups of closing costs. Non recurring closing costs are things that are paid once and you never pay again. Recurring closing costs are things you pay time and again over the course of home ownership, like property taxes and homeowner's insurance. You may wonder why property taxes could be part of closing costs. Well, in most regions, property taxes are really paid in advance. that means that the last owner will have paid many of the property tax that you can owe once you take possession. Part of your closing cost will be to refund the property taxes paid on your behalf, to the last owner. Also to the closing costs charged by your lender, there are also costs related with using a real estate broker. If you have sold a property using an broker, the agent's fees will be paid out of the proceeds of your home, and will be paid on closing. Other fees will be related with your lawyer. For instance, you can probably pay for a title search. You will also pay for document preparation and other fees related with the lawyer's involvement in your buy or sale. Also, the lawyer will be needed to ensure that certain government fees are paid; you will reimburse the lawyer for these fees if the lawyer pays them for you. In general, you may want to be budgeting in the range of 2-3% of the value of your new home for closing costs of varying kinds.

Mortgage Points

What are mortgage points anyway? Should you purchase points? What does it mean if you purchase points? Purchasing points is a procedure whereby you may be able to decrease your interest, what in turn reduces your monthly payment. But each "point" will cost you 1% of your balance. If you have a $100,000 mortgage, a point will cost you $1,000 and it'll decrease the interest charged on your mortgage by one percentage point. This could mean that a 5% mortgage could become a 4%. Fundamentally, when you pay points, you're really paying interest in a lump sum upfront to get a lower rate on your fixed rate. The more points you pay, the lower your rate. The points system is a distinctive feature of the US lending environment. Most other countries don't use points, and mortgages are a bit less complex as a result. Having to think about the impact of points is another factor in deciding on the mortgage that's right for you. With that in mind, what makes more sense for you? More points and a lower rate? Or fewer points and higher rate? To choose, you have to think about if you may be able to afford to make the upfront payment now and if you can hold the loan long enough to benefit from an upfront interest reduction. The longer you plan to have your loan, the more it makes sense to pay for points now because you will have a long time to benefit from the lower rate.
in 2015 these are the past rates
Generally, points are accessible on locked in mortgages. If you really want to make this approach work for you, you may want to be looking at a long term locked in mortgage, what you will not have to renegotiate for at least 5 to 7 years. If you're going to be cash short when you purchase your home, points might not be the choice. In this case, shop around for the mortgage that gives you the best interest without points. And keep in mind that there is a big range of lenders in the business, and that many are willing to compete to get your business. You might be able to get the same or similar rate without points that you could have purchasing points at another lender. There are lenders who offer "negative points". These may be portrayed as cash rebates to you, for bringing your business to the lender. But, it also usually results in a higher interest being applied to your loan. Usually, negative points will cost you many more over the long term, though you can have extra cash in hand in the short term.

Saving Money on Your Mortgage

In most cases, it's best to get the shortest possible amortization coupled with the lowest rate possible. This is how you save money on your debt in the long term. But, you must be cautious. The shorter the amortization, the higher the payment. While you save money over the long run because you pay less in interest charges for your loan, you must be able to afford the payment in the short term. One choice what reduces your risk and still allows you to save money is to keep your mortgage at a 25 or 30 year amortization, but increase your payment. Most lenders will let you do this without penalty. Increasing your payment by a small total will let you pay off your mortgage years earlier, while leaving you the choice of decreasing your payment back down to the original total in the case that you need that money. So, let us say you get a 5 % increase this year. If you have the right mortgage you could simply increase your payment by 5%. While a small change in the total that you pay per payment, it'll make a big difference over many years. Every penny of that extra 5% is paying off the balance (or principal) of your loan. Then, a new baby arrives. You want the 5% back? You decrease your payments back down and away you go. Remember that majority of lenders will have many limitations on the total that you may increase your payment and the number of times you may be able to change it. The other way to really cut the time off your mortgage is to make lump sum payments against it. If you can not see your way to increasing your payments? This year, take your yearly bonus and put it directly against your mortgage. Again, every dollar will decrease the balance of your mortgage and will mean that you pay less interest in the long run. small amounts every year will decrease the total of time it takes to pay your debt off and who does not want to be mortgage free?

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