The Mystery of Mortgages.

By: Thomas Hunter

The world of mortgages can be very overwhelming when you first look at all of the options. There are so many terms, regulations, different fees, options, and different forms that it can become very confusing. But with a little understanding and research on exactly what mortgages are all about, you will find that it will be a lot easier to apply and get the home of your dreams. Below is some information on mortgages and some of the things that go along with them, like fees and terms, to help give you a little understanding on the subject.

Types of mortgages:

There are many types of mortgage options available. The three main types are fixed rate, convertible and special loans.

The fixed rate home loan in which you have options like:

· 30year loan – where you pay a fixed fee over the course of 30 years.
· 15 year loan – where you pay a fixed fee over the course of 15 years.
· Biweekly – where you pay your repayments every two weeks.
· Adjustable rate mortgage or ARM – where you pay you variable amounts each repayment, they are based on the interest rate.

Convertible loans that include:

· Hybrid and convertible ARM – where you can covert between a fixed rate or an ARM.
· Interest only loans – where you only pay the interest each payment until you are able to put down a lump sum.
· Balloon loans – where you pay only the interest and at the end of the term you pay the total amount due all in one large payment.
· Reverse mortgage – for equity rich seniors and don’t have to make any repayments until sale of the house.
· Buy down loan – a loan that works on points to lower interest rates.

And the last category of loans is special loans:

· FHA loan – for first home buyers and people with credit problems.
· Veteran Affairs mortgage loan – only for people and widowers of the armed forces.

With all these mortgage options and more there will definitely be one that will suit your needs.

There are many types of fees when it comes to mortgages, some of these fees and what they are for include:

· Appraisal – where you pay for a person to do an appraisal on what your completed home’s value will be.
· Organization – a fee that pays the lender and their workers for processing your application and other related duties.
· Down payment – what you put down on a deposit on your home, this is usually about 1–20%
· Closing costs – this pays for the transfer of your ownership of the home, this is usually 1-3% of your loans total but it can vary.

There are many other terms that you should know when going into the mortgage field. Below are some of them and what they mean.

· Points – these are used to lower your interest rate and are usually done by a lump sum payment at the closing.
· Good faith estimate – this is when you are given that total in amount of fees you will have to pay when it comes to the closing.
· Loan locks – this is where you and the mortgage company or lender agree on a set interest rate at the beginning of the mortgage process, if you don’t lock your loan the interest rate can increase or decrease.
· A truth in lending disclosure – this form gives you the complete cost of your loan in both a percentage and dollar form.
· Pre qualifying – this is where you qualify for a loan before you actually go for one, it is a good way to review your financial status and lets you determine what amount of loan will suit your budget.
· PITI – this means principle (amount of your loan), interest, taxes and insurance, all of these things are crucial to your mortgage and your repayments.
· Escrow – this is where money and important information is held by a third party while two people are in a business transaction.

There is so much information you need to take in when you go into the world of mortgages but hopefully the above has given you a little bit of understanding of what it is all about. This should help you ease into the mortgage field a little easier. A financial professional or your lender will be happy to go through all the details with you when you are having trouble.

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