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Mortgage Questions For 2012
2012 is here, and it's a great time to buy a home! The market for buyers is full of wonderful opportunities, with thousands of homes to choose from. However, before you get started on your quest, you'll need a mortgage. The process of obtaining a home loan is still mystifying to many consumers, which is why Lender411 has created this guide to answer all your mortgage questions. 1. What is the definition of a mortgage? A mortgage, also known as a home loan, is a legally binding contract made between a lender and a borrower that uses property as collateral to secure the loan. This means that the lender can take possession of the property if the borrower fails to make payments. 2. What is a mortgage lender? Mortgage lenders are financial institutions that provide consumers with the funds to purchase a home, paid back over a long-term period. Borrowers are required to pay monthly installments to their lender which includes principle, interest, and any additional fees. 3. What is a mortgage principle? The mortgage principle is the amount of loan money that a homeowner borrows, excluding interest. 4. What are lender fees? Lender fees typically range anywhere from 2 to 5 percent and may include items such as appraisal costs, document preparation, and application costs. 5. What is the Truth in Lending Act? The Truth in Lending Act is a federal law that was passed as part of the Consumer Protection Act. It requires lenders to reveal information to the borrower and detail all costs associated with the transaction. 6. What is a mortgage refinance? This occurs when homeowner acquires a new loan to pay off an existing loan. Homeowners usually refinance to lower their interest rates and/or access cash from their home equity. 7. What is a home equity loan? A closed-end home loan secured by the borrower's house. Many consumers get a home equity loan to pay off debt or to make home improvements. 8. What is a second mortgage? Mortgage loans taken out after the first mortgage and secured against the same asset as the first mortgage loan are called second mortgages. The second mortgage is based on the amount of equity or ownership interest you have in your home. 9. What is a reverse mortgage? This type of loan is for the benefit of seniors, giving them the ability to supplement their income. A reverse mortgage is a contract between the lender and the homeowner in which the lender makes regular payments to a homeowner for a specific period of time. The monthly payment received by the homeowner is based on the amount of equity the homeowner has in the home. The monthly payment is a non-recourse loan, which means the payment is tax free to the homeowner. The homeowner is allowed to reside in the home until they relocate or till death of homeowner, after which the lender sells the home to recover the loan. 10. What is a home equity line of credit or HELOC? A HELOC is simply an open-end loan designed as a line of revolving credit for a maximum amount, instead of a fixed loan in which the home is collateral. The loan permits the borrower to repay and re-borrow the funds available. HELOCs can be used to pay for college education, private school tuition, high interest debt, home improvements, and major medical bills. 11. What is a fixed rate mortgage? A fixed rate mortgage is a home loan with steady mortgage interest rates and monthly payments that stay the same throughout the life of the loan. 12. What is the adjustable rate mortgage? An adjustable rate mortgage is a mortgage loan where the interest rate is periodically adjusted based on an index. The monthly payments made by you may alter during the term of your mortgage loan with the changing interest rate. Fluctuating rates pass on part of the interest rate risk from the mortgage lender to you. Lender411 has the answers to many other mortgage questions, found in our library of resources and articles, our calculators, and our network of experienced lenders. You're sure to get the information you need to get a mortgage and find the perfect home for you! |
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