Mortgage Advice Corner


8 Mortgage (Mtg) Mistakes to Avoid

  • Avoid borrowing too much money.

  • Look into the first-time homebuyer’s programs offered by state, county or local governments..

  • Request your credit reports from each of the three credit bureaus; review and fix any errors ensuring they are corrected before you apply for a loan.

  • Getting pre-approved for a loan. Or, use this mortgage qualifier to calculate how much house you can aford. This way you know how much house you can purchase.

  • Shop around for the best rates and terms. A simple rule-of-thumb is to look at a minimum of three lenders or brokers.

  • Avoid paying unnecessary fees. Don’t hesitate to question the validity of any fees.

  • Be prepared to cover closing costs. These can range from 2% to 5% of the purchase price of the home. Establish an emergency savings fund for unexpected repairs or contingencies

  • Finally, once you have become a homeowner, be sure to retain a cash reserve for unforeseen expenses.

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Mortgage Basics – Common Terms Explained

Mortgage – A mortgage (Mtg) is a legal document signed by a borrower when a home loan is made that gives the lender the right to take possession of the property if the borrower fails to make timely payments or fails to pay off the loan in accordance with the terms of the mortgage.

Conventional loans – Regular mortgage loans issued by a financial institution other than those insured or guaranteed by a government agency such as the FHA (Federal Housing Administration), or the VA (Veterans Administration).

Fixed-rate loans -- Loans where both the interest rate and the monthly payments (for principal and interest) stay the same during the life of the loan. Generally fixed-rate loans have repayment terms of 15, 20, or 30 years.

Loan origination fees -- Fees charged by the lender for processing the loan and are often expressed as a percentage of the loan amount.

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Settlement or closing costs – These can include:

  • application fees;
  • title examination, abstract of title, title insurance, and property survey fees;
  • fees for preparing deeds, mortgages, and settlement documents;
  • attorneys’ fees;
  • recording fees; and
  • notary, appraisal, and credit report fees.

Annual percentage rate (APR) – APR is a calculated rate that expresses the cost of credit as an annual rate. The APR includes the interest rate, points, broker fees, and certain other credit charges that the borrower is required to pay.

Points -- Fees paid to the lender for originating the loan. One point equals 1 percent of the loan amount. Points are usually paid in cash at closing.



Escrow -- The holding of money by a neutral third party prior to closing. It can also be an account held by the lender (or servicer) into which a homeowner pays money for taxes and insurance.

Lock-in – This refers to a written agreement by the lender guaranteeing a home buyer a specific interest rate on a home loan provided that the loan is closed within the stipulated period of time -- such as 60 or 90 days. Often the lender charges the borrower a fee or points for locking in the interest rate.

Private mortgage insurance (PMI) -- PMI is insurance that protects the lender against a loss if a borrower defaults on the loan. It is usually required for loans in which the down payment is less than 20 percent of the sales price or, in a refinancing, when the amount financed is greater than 80 percent of the appraised value. PMI fees or premiums are included in the monthly payments.

Good faith estimate -- Under the Real Estate Settlement Procedures Act, the lender is required to provide the borrower with a good faith estimate of closing costs at the time of application or within three days of application. The good faith estimate lists each expected cost either as an amount or a range.

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