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Whether applying for your first loan, second or refinancing, the mortgage application process can be overwhelming. Understanding the language of mortgages is a first step to understanding it. A deed-in-lieu is a subject you really want to avoid, but it is coming up more and more. When a borrower is about to be foreclosed on, a lender will sometime take this deed. The borrower loses the home, but avoids the cost of foreclosure. Talk to a mortgage professional and they will soon utter the phrase “pity”. Nope, it is not an evaluation of your loan. It is really “PITI”. It means principal, interest, taxes and insurance, to wit, a global figure for the obligation you are undertaking. When is the best time to start the loan process? This is a common question and leads us to the term pre-approval. You want to get pre-approved for a loan and lock in an interest rate. This allows you to shop for a home knowing exactly what you can spend. Refinancing is one of those terms that sound fairly basic. It is. One refinances to pull cash out of equity or just to get a better interest rate or monthly payment. Be aware, however, that your original loan may have a pre-payment penalty. If you get into trouble trying to pay your mortgage, it is important to understand a lender does not want to foreclose. If you communicate with them, they will often give you a special forbearance that lowers or eliminates payments for a period of months. There are a number of quasi-government lenders. Fannie-Mae is one. It does not lend to the public directly, but guarantees loans made by lenders to certain types of lenders, often first time buyers or low-income borrowers. A mortgage loan is really a calculation of risk. Some lenders try to lower their risk by requiring borrowers to maintain a “cash reserve”. This is an amount of money held in a bank account and is often equal to three months of your total expenses. Timing is a big issue in the world of mortgages. Specifically, rates change on a daily basis. To avoid this problem, you want to “lock in” your interest rate when a lender approves you. The cost is usually a few hundred dollars. The concept of truth-in-lending is designed to protect you, the consumer. Finance is a complex subject, so this law requires the lender to provide you with written disclosure of all fees, conditions and terms associated with your loan. Visiting a country where you don’t understand a word being said can make you feel bashful and intimidated. The same goes with dealing with lenders. This can lead to unfavorable loans. Take the time to learn the lingo, and you can avoid such problems.
Article Source: http://www.financemanual.com
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