Basic Home Loan Terms Explained

Though some or all of these terms may seem somewhat foreign to you, do not get overwhelmed, there are simple explanations for each and every one of them. ARMS, points, interest rates, good faith estimates, pay-downs, lock-in dates, so on and so forth. They are inundated with information riddled with terms of art. The wonderful world of home buying can sometimes overwhelm the first time home buyer.

So a mortgage is a loan against property that is secured with a lien against it. This "mortgage" is basically a lien against the property until such time that loan is satisfied. Mortgages are simply a loan against property that is secured with a "mortgage". Typically all home loans fall into two basic categories: mortgages and home equity loans.

Let us start with the different types of loans there are.

A home equity loan is a loan that is also secured with a lien against the property. The home equity loan lien is secondary to the first mortgage on the home. This type of loan is based on the amount of equity in the house. Equity is the difference in dollars between the value of the home and the amount owed on it. Equity can be a positive number (the house is worth more than what is owed) or can be a negative number (negative equity) which means that there is more owed on the house than the house is worth.

A lien is simply a legal term that indicates that someone other than the homeowner has a legal right and interest in the property. So, if the property is ever sold, all liens need to be satisfied - any money owed to anyone with a lien must be paid, otherwise the new owner may become obligated to pay the amount owed. A lien is against property, not a person. Typically in all real estate transactions there will be a title search that will reveal any liens against the property. This title search is basically an examination over anyone and anything that may have some legal interest, obligation or right to the property.

If there are multiple home loans on a property the order they are paid in is the oldest to the newest. This is only a factor if the property is being sold for below what is owed. This is either through a "short sale" where the house is being sold by the homeowner for below the amount that is owed in the house. They will need approval from all lien holders in order to do this. This is also an issue if a house falls into foreclosure.

Within these two types of loans you will want to know the difference between a fixed-rate mortgage and a variable rate mortgage. A variable or adjustable rate mortgage is an ARM. Fixed-rate mortgages have the same interest rate from the first day of the loan to the last day of the loan unless it is refinanced. A fixed rate or variable rate loan will generally start off for a period of time at a specified rate and then after that period ends, if the loan has not been paid off or refinanced then the rate becomes adjustable based on specific conditions set forth in advance - typically tied to the federal interest rate. An ARM loan will have typically a 3 or 5 year period during which the rate is lower than the going rate. This is used to entice would-be borrowers or help borrowers have lower payments for the initial period.

"Points" are often discussed in connection with loan packages and interest rates. You can "pay down" an interest rate by paying points for example. What this means is you can pay for a lower interest rate if you pay a specified number of points. Points are simply one percent of the loan amount. So a $100,000 loan equates to $1000 for every point.

Another term you will often here is PMI, private mortgage insurance. PMI is insurance for your lender when the amount you borrow is more than 80% of the value of the property. In these cases the borrower needs to pay for this insurance policy. The calculation for your monthly PMI payment is 0.5% of your loan amount divided by twelve.

Tied to the calculation of PMI, as well as many other factors of the loan is an appraisal. An appraisal is a determination by a real estate professional of what the value of the property is. They will evaluate the property and similar properties in the area. They will consider market trends, recent sales and other factors to give an estimate on what the property is worth and would sell for.

Typically your lender will have a cushion in the escrow account of 2 - 3 months in case you fall behind in your payments. Your lender then makes your required tax payments. Your lender will collect 1/12 of your yearly taxes every month in order to be assured that your taxes are paid. Escrow is money that is being held typically to pay taxes.

Another potential add-on to your monthly payments is escrow payments.

The more you know the better off you will be. During the home loan process, however, you should never feel embarrassed or ashamed to ask what a term means. Though there are many more terms you may encounter these are the most often used, misunderstood terms.

First Time Home Buyer Programs

How will this effect the demand for first time home buyer loans? Many of the more lenient mortgage programs have been discontinued. With the collapse of the Subprime mortgage market, the mortgage landscape has changed dramatically in recent months.

Real estate prices were rising rapidly with each passing day, and it seemed that everyone wanted to be involved in real estate. This historic reduction in interest rates powered a multi-year boom in the real estate market. From approximately the year 2000 until the year 2004 interest rates were continually lowered, reaching multi-decade historic lows by late 2004.

That included lenders, who were happy to gain new business. In the frantic race to make as much profit from real estate as possible, lenders lowered their standards and created new lending requirements that were so lenient it seemed that anyone with a pulse would qualify!

Loose lending standards, historically low interest rates, and rapidly rising real estate values combined to make the perfect formula to attract millions upon millions of people, and create a real estate bubble along the way.

And that is exactly what happened.

And then disaster struck.

In August of 2007, the subprime home loan industry begin to break down. Large investors, monitoring the default rates of mortgage portfolios and concerned about the continuing fall in real estate prices nationwide decided to stop purchasing subprime loans. By late fall of 2007 the entire subprime industry as we knew it had vanished.

For the first time home buyer, as well as seasoned real estate investors, it was easy to take advantage of the lax guidelines offered by these lenders. They had flocked to the real estate market in droves. And then suddenly, the subprime market came to a screeching halt.

With the downfall of the subprime industry, millions of potential home buyers are now searching for alternative mortgage products that will accommodate their financial and credit history.

Does this mean that first time home buyers will no longer qualify for a home loan? No. There are other alternatives besides the subprime mortgage loan.

There are several solutions. Fannie Mae 's American Dream Commitment offers the most exciting, affordable first time home buyer loan solution that we have seen. To quote Fannie Mae, "Many Americans still are being overlooked, underserved, and overcharged in their search for affordable homeownership." In defining their goals, Fannie Mae strives to "expand access to homeownership for first time home buyers and help expand the minority homeownership percentage with the ultimate goal of closing the homeownership gap entirely."

This commitment translates into flexible, accommodative, and low cost home financing available to first time home buyers with less than perfect credit and restrictive budgets. But that 's not all. Reading into the guidelines carefully one will discover some amazing and thoughtful criteria. Amongst these guidelines are included a surprising and liberal allowance for "undocumented income", expanded seller contribution tolerance, and a complete absence of saving and asset reserve requirements. All of these flexible rules make possible the lowest cost, no money down mortgage program available anywhere.

The guidelines provide for a score of 620, but with moderate compensating factors lenders may approve loans with scores as low as 600. Credit score requirements are now the easiest of all of the first time home buyer loan programs available in the home loan market.

In addition to this program, nearly every state offers some form of downpayment help for first time home buyer programs.

Five Tips for First Time San Diego Real Estate Buyers

First time San Diego real estate seekers purchase their first home successfully. Finding San Diego real estate is not difficult, but knowing what to next requires a little research and effort.

It is not a good idea to stretch your money too far. It is important that you take a good look at your budget to determine how much you can comfortably afford to spend on a mortgage. As a first time home buyer. Make Sure That Your Finances Are In Order.

Get pre approved for a mortgage. Once you have done the work to clean up your credit report and pay off your minor debts, as a first time San Diego real estate buyer, you should get pre-approved for a mortgage through a lender. When a lender pre-approves you for a mortgage, you are given an estimate of the amount of mortgage you will be approved for based on your credit history, debt, and income. With this pre-approval amount, you have a price range that you can use to shop for a home.

Choose your agent carefully. The real estate agent you choose will play a major role in the home shopping process. Not only should you choose an agent that is reputable and experienced in the San Diego real estate market, you should also make sure that you feel comfortable communicating with the agent. It is helpful to work with an agent that has experience working with first time home buyers. You do not have to be best friends with your real estate agent but you do need to get along with this person. After all, you will be working together for the next three to six months.

Narrow down your selection as you go. Many first time home buyers have difficulty making a decision about a home to purchase. After several days of home searching you may find yourself with several houses to choose from. This can make it difficult since you have probably forgotten many of the houses since visiting them. You should narrow down your selection of houses as you go. As a matter of fact, it is a good idea to only have three houses in mind at any given time. Weeding out the houses will make the final decision much easier.

Instead, make a decision to sacrifice some of the things you desire in a home that can be added later. That does not mean that you have to choose a house that you hate. You might have to lower your expectations slightly to purchase a home.

Finding your dream house as a first time home buyer might be somewhat of a stretch, especially if you are limited by financial reasons. If you must settle when it comes to San Diego real estate, do so within reason.

Being a first time home buyer can be a rewarding process, especially if you have the knowledge you need to make an informed San Diego real estate decision.

Wells Fargo vs. Chase Home Mortgages - What You Need To Know

For an overview of both Wells Fargo home mortgages and Chase mortgages to learn more about the services each offer, keep reading.

WELLS FARGO

Wells Fargo is one of the United States' most versatile mortgage lenders. They offer a range of refinancing products, mortgage programs, types of mortgages and arrangements for borrowers of all stripes and colors.

Home Buying Tools

The Wells Fargo website (http://www.wellsfargo.com/mortgage) is flush with a full guide on the home ownership process - from finding a home to applying for a mortgage, choosing financing and even closing the deal.

For the first-time home buyer or the seasoned real estate pro, their tools are invaluable. Registrants can track home selling prices by email, pick a loan based on personal criteria, calculate the benefits of renting versus buying, and even get pre-approved.

Special Financing Programs

As a versatile and flexible lender, Wells Fargo offers a number of specialty financing programs. They offer special programs for borrowers with less than perfect credit, people building their own homes, military personnel and veterans, and even reverse mortgage programs. They even offer special rates and consideration for Wells Fargo customers.

Better Payment Plan Options

Tired of having your mortgage payment always coming out two days before your pay check gets deposited? With Wells Fargo, you can set up a preferred and personalized payment schedule that makes your payments match your payday schedule.

Personal Support

With hundreds of branch locations, all staffed with local mortgage experts, you're guaranteed to get ongoing, personalized, quality customer support. That kind of mortgage counseling and personal service isn't easy to come by.

Not only do they provide ongoing support, but their hours are open until 11pm CT during the week and all-day Saturday.

Renovation and Construction Financing

Along some other lenders, Wells Fargo does offer additional financing for home construction and planned renovations on new properties. Alongside documentation of your project plan, budget, and estimated completed dates will be your loan application for the property.

CHASE MORTGAGE

Chase Bank and its mortgage division are one of the largest mortgage lenders in the United States. By offering home buyer 's guides, loan calculators, and fast closings, they've attracted a lot more customers over the past decade.

Reduced Closing Costs

Chase Mortgage offers what it calls its "Closing Cost Advantage." By not charging commitment fees, appraisal fees, underwriting fees, flood certification fees, credit report fees or origination fees, they promise to save you as much as $200.

Though helpful, however, you must remember there will still be fees and costs associated with your mortgage, including a $395 application fee.

Fast Closing Guarantee

Chase Mortgage promises its customers it will close their house sale on time or they'll give you $300. Unfortunately, this program - Purchase Promise - is only available on purchase mortgages and not for refinancing loans.

Also, to qualify for the Purchase Promise you need to submit a full loan application with documentation at least 30 days prior to your closing date. You then must meet the underwriting conditions of your loan as quickly as possible.

Finally, you need to sign and date the Purchase Promise form. While the promise is there, actually getting the $300 guarantee is harder than it looks.

Options for Poor Credit

Chase Mortgage offers a number of loans for a variety of home buyers, including those with less-than-perfect credit. According to Chase, if you can prove the financial problem is in the past and behind you, they're willing to work with you to find the right home loan.

However, that home loan will cost you in interest rate points and closing costs, so be prepared to get a rate that 's a few points higher than the mortgage rate advertised in the paper.

Home Connect Service from Chase

Home Connect is a service offered by Chase that 's designed to make the house selling and buying process a whole lot easier. Their Home Connect service provides homeowners with mortgage prequalification and early financing, a personal assistant, real estate expert guidance, recommendations for real estate professionals, guided service and even cash-back when you buy or sell your home.

The service is free to everyone, while Chase offers bonuses of between $175 and $2500 when you sell your home through the Home Connect service.

Remember, when you decide to put your business with a mortgage lender, you're basically saying that you're ready to be this lender 's customer for the next 30 years.

Whether you wind up needing an extra day on a payment, a break on a refinancing deal, or simply quality customer service, is that 30-year relationship really something you want to jeopardize by opting for a mortgage company that doesn't offer renovation financing, personal support, extended hours, flexible payment plans, varied financing and customized tools?

Steps To Getting A Mortgage And Buying A Home - Part 2

As you read this article, you will find out about the crucial phase of actually buying a home and moving into your new home. Buying a new home is not just about researching mortgages and applying for mortgages, theres the important step of moving in.

In this buying a home article, you will learn:
* About the negotiation of buying a home
* What does a solicitor do in the process of buying a home
* Property valuation and surveying
* Completing the mortgage application

About the negotiation of buying a home:
The negotiation process is one which for the first time home buyer, is not one which you are likely to excel at. Negotiation is an art which some people have learned to master, while others who are new to negotiation do not always get the best deals.

The dynamics of the negation is this: the home owner has a property, and wants to get the most money he or she can. You are a potential buyer, and want to get the lowest price possible. The degree that you are a better negotiator will determine how lower you buy the property for, and the more skilled the existing home owner in the art of negotiation, will determine how much more he manages to get out of the deal.

The last paragraph may make you think whether you can really get the best prices for the property. However, there is a way to make life easier when negotiating, and that is with a bit of research.

To be able to get the best price a suggestion is to look at similar style properties in the area you are thinking to buy a home in and look at the prices. That way, you can make sure that you are getting the real estate at least at the market value or around there.

What does a solicitor do in the process of buying a home:
After you have found your new home to buy and started the negotiation process, you can now look to finding a solicitor. A solicitor will help you with all the paperwork necessary in the process of buying a home. Some people have mixed views at this point, some like to apply for the mortgage, while others like to appoint the solicitor first.

Appointing the solicitor in the beginning can save a lot of hassle later on in the process of buying your new home. Now you can apply for the mortgage.

Property valuation and surveying:
Even though properties in the area may have a similar price, there are some things we do not know about the property. Is there any structural damage? Are there any unseen expenses, which is why the seller is planning to sell?

The property valuation and surveying will bring out how much the property is worth. Before a mortgage lender will agree to give you a mortgage, they will need the valuation and surveying done on the property. The real estate professional fees for valuation and surveying vary, and again research can help you find the best prices.

Completing the mortgage application:
You now can speak to your mortgage lender and get confirmation that they are willing to give you a mortgage for the sum needed to buy the home. At this point most of the hard work in the process of buying a home has been accomplished.

When the mortgage lender gives you written confirmation, and the property taken off the market, mortgage finalized, then you can look forward to moving in! If you have aspirations to buy more than 1 property, then the first time experience will be beneficial to you, in the future. The process of buying a home can be a hard one, for the first time.